IEEJ : April, 2015 All Rights Reserved

Changing prioritieson ‘climate action’ and energy policyin Europe as they have emerged
during 2014
A strategic assessment
Gwythian Prins

7 February 2015

THIS IS A REPORT IN FINAL FULFILMENT OF A CONTRACT JOINTLY FOR THE
INSTITUTE OF ENERGY ECONOMICS OF JAPAN.

1IEEJ : April, 2015 All Rights Reserved

SUMMARY
Overview
1. 2014 was a time of unusual and comprehensive flux in European affairs. It saw
the abrupt end of the post‐soviet era 1991‐2014. It therefore concluded theperiod since 1989, and especially since the late 1990s, when all current
European ‘climate action’ policies were conceived and formed. We are in adifferent age now. The evidence today is that much is now different both fromwhat was the case in January 2014 and from what official statements are stillsaying. Nothing in the period 1989‐2014 should be assumed to predicteither in general or in detail what will happen in 2015 onwards. This meansthat the Paris 2015 UNFCCC meeting will occur in circumstances and underpublic and political priorities that are quite different from those which themoving circus of its professional governmental and NGO activist participants
assume, as the failure to find a workable consensus at the Lima COP20, alreadyshowed.
2. This flux arose in part from domestic political changes. Prominent was arrivalof a new President of the European Commission. Mr Juncker was appointed ina new way by interposition of the European Parliament: it superceded thepowers of the nations. A radical change from previous priorities andprocedures has occurred with the Juncker Commission. It remains to be seen if
Mr Juncker will be removed from his new office because of allegedly corrupt
practices in Luxembourg while he was Prime Minister; but the direction of his
Commission is increasingly clear and may continue even without him.
3. Volatility occurred also because of global events. Some are the result of pasterrors by Europeans but now beyond their direct control; some are fall‐out
from the bitter civil wars fracturing the Muslim ‘umma. Respectively, these
relate to Russia’s return to open hostility following the annexation of Crimea on
21 March and to naked contests of force in energy geo‐politics as a result ofSaudi action from September to squeeze higher cost oil producers (Iran andRussia in that order) and to protect OPEC market share by depressing the oil
price. By the end of December, oil prices had halved and have dipped to below$60 bbl. This is the eighth slump in oil price of more than 30% in the last thirty
years. The ‘peak oil’ rhetoric favoured by many ‘green’ organisations is deflated.
Other contextual international events are a consequence of European decisions.
Above all these relate to the rolling and deepening crisis of the single European
currency. The Greek election result in January 2015 returning a strong anti‐
2

IEEJ : April, 2015 All Rights Reserved

austerity government opens what many expect to be the beginning of the end‐
game for the single currency. The Euro weakens still.
4. Facing 2015, Germany, Spain, France and the UK are the pivotal European
states on climate and energy issues, each for different reasons; and there areuncertainties about how events will unfold in each. But in two other groups ofstates ‐ in Scandinavia and the eastern rim ‐ matters seem more predictable.
The report identifies underlying trends and discusses forthcoming potential
trigger‐points to provide a secure foundation for assessing future events.

In a little more detail…
5. There are two background special factors that make assessment of EU
politics complicated: the imbalance between its ambition and its power and therefusal to recognise openly the consistent record of failure in the declaredobjectives of EU ‘climate action’ policy to deliver the predicted results. These
explain the deeper reasons why success is inherently unlikely in the future even
if the policies were applied as intended, which they were not and are not.
6. The evidence supporting that judgement is in the three centre‐pieces of EU‘climate action’ policy of the last two decades each of which is reviewed indetail: attempts at carbon trading have failed; ‘green growth’ promised andpredicted has failed to materialise – and these two polices have contradictedeach other – and the series of declared ‘climate action’ polices (20:20:20; 2030)
have been subtly changing in unacknowledged concession of failure. Notably,
the ambition to impose ‘binding legislation’ on sovereign nations has been
quietly side‐lined in the 2030 ‘climate action’ policy adopted in October 2014.
7. It is broadly a copy of the NAMA tactic that has been followed in the
UNFCCC conferences since the Durban COP and it is already plain that NAMA
(now called INDT) will be the strategy for Paris following the predictable failureof the Lima COP20 to change the established pattern of these conferences(“deadlock”; extra time; “breakthrough”; toothless ‘Saviour Document’)
8. However, the return of open hostility in relations with the RussianFederation and with its autocratic president in particular, and the Saudi repriseof the September 1985 tactic to regain control of world oil markets havecatapulted energy security issues to the top of the EU and national European
agenda.

3

IEEJ : April, 2015 All Rights Reserved

9. The decisive Republican victories in the mid‐term elections of November
have consigned President Obama to ‘lame duck’ status. Lacking democratic
mandate via Congress will further impede his attempts to force domestic‘climate action’ by executive order. As he strives to secure some sort of legacy
from his presidency, his inept concessions to China – which conceded nothingof importance whereas Obama promised much – followed by his recklessspeech in Brisbane on 14 November, insulting the Australian Government at thetime of the G‐20, has further weakened his international standing andcommensurately strengthened that of China and India (as became plain at theLima COP20) as well as further stiffening Congressional opposition to his
initiatives, including his recent priority to international ‘climate action’ matters.
Obama’s Australian speech also poses Japan with difficult choices about friends
at a time when its own renewables policies, notably extravagant FIT for solar, isin turmoil, its thermal coal and LPG imports rising and its econ0my falling backinto recession.
10. Closely related because of its world‐wide ramifications is the on‐goingenergy‐geopolitical civil war between Muslims in the Middle East. Saudi Arabia,
supported quietly by Egypt, Jordan (and Israel), are on the one side. A motley
combination of Islamists stands on the other. There is Iran (running Hezbollah
and, with help from Putin, Assad). There is the Muslim Brotherhood and allies(Qatar, Turkey, Hamas). There are the Da’esh (ISIL) and Al Qaeda (sometimes
fighting each other, sometimes not). At the moment, the Iranian pursuit of thenuclear weapon is the epicentre of danger to the whole post 1945 world order aswell as the region. But intellectually weak geo‐political analysis in Washington
and Europe means that the fact that (for the moment), the Iranians also fight
our enemies, the Da’esh, makes them seem to be our friends. This has given
credence to a P5+1 process which looks likely to produce the worst outcome,
namely a leaky and vague diplomatic instrument that cannot prevent breakout.
If that happens, all bets for global security are off – which is another subject.
11. In light of all the above, how should we interpret the radical moves by the in‐coming Juncker Commission? It is plain on the face of the facts that the new
Commission has returned to more traditional priorities. The escalating
Eurozone crisis, the renewed Cold War with Russia and European energy
security are the top priorities. ‘Climate action’ has been swiftly relegated to alow priority despite any statements or appearances to the contrary. Ms Connie
Hedegaard and the ‘Climate Action’ DG have disappeared. On the record of4

IEEJ : April, 2015 All Rights Reserved

actions, ‘Climate Action” is very much the junior issue in Commissioner MiguelArias Cañete’s portfolio. The concerted ‘Green’ opposition to his appointment
was simply swept aside.
12. The current international scene is so full of tensions and contradictions thatno firm predictions about what may happen in particular countries can bemade except the likelihood that formally declared policies are not likely totranslate into what they intend. The report therefore responds to the nature of
events by offering a deeper sort of analysis. It highlights the forces that areimportant in assessing national directions in three groups of European states.
Particular attention is paid to various national positions on nuclear power inthe energy mix.
13. Paradoxically, the more reliable political and business opportunities toadvance the agenda of innovating clean and affordable energy for all (as spelled
out in The Vital Spark in 2013) probably lie outside the countries which havebeen core enthusiasts for ‘climate action’ in the past and they do not lie in
revolutionary but in evolutionary energy technologies, and not in a principal
preoccupation with decarbonisation.
13. Emerging difficulties in the German economy as a result of its energiewende
policies; the implications of the hollowing out of Spanish democracy –accelerated by the Syriza victory in Greece; increasingly firm resistance to EU‘climate action’ and energy policies in Poland; the consistent priority of geo‐
political over ‘climate action’ priorities in the Czech Republic and Slovakia;crisis in the British energy market at a time of historic uncertainty in British
politics and problems in the previously stable environment of the French
nuclear industry at a time of crisis in French politics are particular points tonote.
14. The report is silent on recent developments in Japan but was written on theassumption that Prime Minister Abe was likely to obtain a renewed mandate in
the snap election in December (as in fact occurred) and that, broadly as has
happened in Europe, Japan’s return to recession will probably reduce thepolitical appetite for gesture ‘climate action’ policies and increase the interestin reliable if less flamboyant practical export opportunities as well as
restoration of least‐cost energy and energy security of supply. The firm
response of some Japanese power companies by refusing to destabilise theirgrids with uncontrolled subsidy‐driven solar electricity surges and METI’s
reported resistance to German levels of deployment subsidy via feed‐in tariff
5

IEEJ : April, 2015 All Rights Reserved

which have exacerbated this additional energy problem for Japan, supports thatview.

15. Key findingsStructural and policy priorities have been radically changed at the EU.

Russia, Russian challenge to the European security order, energy
security and the Eurozone crisis are the top issues

‘Climate action’ has been rapidly demoted to a low priority

The 2030 EU ‘Climate Action’ plan was adopted but is unenforceableThe fall in oil and gas prices has destroyed the business cases based on‘Peak Oil’ assumptions for much unconventional energy investment. It
undermines many national energy plans in Europe (eg the UK DECC;
the Scottish Nationalists; the German energiewende above all).



Subsidy and system management costs for uncontrollable generators(wind and solar) are rocketing and face consumer price backlash in UK

But Germany is the key pivot state in the 2014‐15 European crisis
although there is more uncertainty about political dynamics in core
enthusiast states than in the Scandinavian and eastern European
peripheryThe energiewende experiment is poisoning the German economy but willcontinue. Germans probably have the highest public tolerance for cost

The Eurozone crisis, and social stress in southern Europe, will probably
dominate European politics in early 2015. A hollowing out of democracy
is occurring across Europe, North and South, with profound implications



The need for security of supply will continue to trump ‘climate action’ ineastern Europe. Poland and the Czech Republic led the successful
neutering of the EU 2030 ‘climate action’ policy in October.

The influence of Denmark and of environmental NGOs on EU affairs
waned in 2014 and does not look likely to revive to 2000s levels. To theirvery public fury, the structural changes in EU procedures have locked
environmental NGOs out of their previously privileged access to policy‐
shaping.

6

IEEJ : April, 2015 All Rights Reserved

TWO SPECIAL FEATURES OF THE EU
The autumn and early winter of 2014 was a time of great and unusual flux inEuropean affairs. To understand reliably what is happening in any given
member state, it necessary first to understand the EU’s stated policies on
climate change and their consequent impact on the production and use ofenergy within the Union. Individual countries must be viewed and interpreted
within that volatile context. An accurate assessment of what may actually
happen, as distinct from what the policies say, is then possible. They are not thesame thing.
In politics there is always a gap between words and actions. History shows that
this is especially so in the EU institutions, simply because there is such a great
structural mismatch between its stated ambitions and the actual powers that it
can deploy.
While that is frustrating to declared federalists like the Vice President of theprevious Barosso Commission, Viviane Reding of Luxembourg, who impatiently
calls for abolition of the sovereignty of EU states, it is a consequence of theMonnet Method of building a United States of Europe (USE) by stealth, never –or rarely – knowingly declaring the real intention, given that the project offederation commands minority support in the relevant electorates.1
That is evident in the fact that from its creation in 1979 until 2014 thepercentage of citizens choosing to vote for the European Parliament fell
election by election and has been under 50% since 1999. It only rose in 2014 toelect large numbers of members from parties that wish to dismantle the EU in
its present form. Often overlooked, this helps to explain why the EU has such
weak democratic legitimacy to push through any of its policies. It also helps to
explain why it reflexively prefers autocratic and administrative modes of policy‐
making. This also is to be seen in the insistence that Union and international

1

The ‘Monnet Approach’ is best read at source: Arthur Salter, The United States of Europe; andOther Papers, George, Allen & Unwin, London, 1933; Ms Reding’s view is that the Commission
should become the Executive, the EU Parliament the Lower House and that the EU Council
where currently the leaders of the sovereign member‐states meet, should become the Senate of
the new United States of Europe.

7

IEEJ : April, 2015 All Rights Reserved

law should over‐rule national sovereignty, because only if this principle isaccepted can sovereign state power be curbed.
The conflict is to be seen in the different interpretations of the concept of‘subsidiarity’ to be found in national capitals and in Brussels. National capitals –notably London – interpret ‘subsidiarity’ to mean that decisions are to be taken
at the level closest to their effect upon people. Power only rises from local tonational to Union level where required. The Brussels interpretation is precisely
the reverse. It has always been that ‘subsidiarity’ means that all decisions aretaken at Union level unless the Union level decides to permit them to be madeat national or local levels.
In this circumstance of high but unspoken ambition and low effective executive
power, there is an understandable tendency for EU officials to assert that thewords are the actions. There has been a constant tendency in Brussels to equate
speaking with doing. Simply because something has been said or written in apolicy document, it is believed that something has happened: the wish is
confused with the action wished for. Here again, if not borne in mind,
observers who read policy literally can be easily misled.
In recent years frustration in Brussels has increased with the stubborn refusal of
the real world economy (which includes real world electors and consumers indemocracies) to conform to EU Plans, most seriously for the Single Currency,
whose plight outweighs that of all other issues for the EU at this time, but notleast in the area of climate and energy policy.
The frustration is to be seen, for example, in the inability of renewable energy
to progress spontaneously in the fuel mix2. “Spontaneity” is a pivotal andmandatory requirement for success in any energy transition. “Spontaneously”
means actions taken without the need for tempting bribes in the form of
deployment subsidies paid from hidden and inescapable extra costs loaded
onto consumers’ energy bills. This device is attractive to politicians because
their fingerprints are not directly on the tax; but it is therefore doubly
2

In truth this should be no surprise as just indicated. The historical record of energy
transitions is clear enough: only very high density, physically concentrated, dispatchable energy
sources (oil in the Middle East or nuclear in Japan, for example) have ever achieved the speed ofadoption now prescribed for low density, widely distributed and intermittent ‘renewable’sources which, above very low levels of market penetration, demand such massive
infrastructure investment from high‐grade and depleting resources mobilized by high‐grade,fossil fuel derived energy‐ that it casts doubt on the strict correctness of the adjective‘renewable’. Qv V. Smil, Energy Transitions: History, Requirements, Prospects, Praeger, 2010,
passim, but esp. Ch 4

8

IEEJ : April, 2015 All Rights Reserved

regressive in economic impact, and also instrumental in stimulating consumer
anger when it is revealed.3
Also frustrating for the EU nexus of bureaucrats, politicians and lobbyists
inside the ‘Brussels Bubble’ has been the evidence which has accumulated overthe last decade that the carbon intensity of Europe is not reducing as aconsequence of the application of EU climate policy. Only recession and non‐growth, much assisted by the rolling failure of the single currency project now
verging on a Japanese‐style lost decade of deflation, have done this.
As irritating for them is the fact that the USA, under the Bush presidency a
truculent non‐signer of the Kyoto Protocol suite of top‐down targets andtimetables policies that were at that time championed by the EU in the peakyears of climate catastrophism during the last decade, has been reducing
carbon intensity by switching swiftly to cheap shale gas and building modern
industrial capacity. Of course it is possible on current trends that in his bitter
confrontation with a rampant Republican Congress the ‘lame duck’ President
Obama may in fact achieve a legacy after all before leaving office, in the form of
blunting that organic American growth by his un‐American addiction to hightaxes and burdensome executive regulations.
However the basic fact that US carbon intensity has fallen faster than carbon
intensity in the EU is also a strong indication that the EU policies may be
misconceived ‐ if reduction of carbon intensity is indeed their aim. The degreeof failure may be veiled to some extent by the fact that shale gas exploration
within the EU is being inhibited by intrusive levels of regulation. This, ofcourse, helps to make it a self‐fulfilling prophecy that there are limited
prospects for shale gas in Europe.
But the lesson that is being drawn from failure is not that there are defects in
EU policy. As the set‐back has become clearer, the response has been similar tothat in the Kyoto Protocol era of the UNFCCC.4 It is to call in stronger tones,

3

qv for more discussion of ‘stealth’ taxes, M. Sinclair, Let them eat Carbon: The price of failingclimate change policies and how government and big business profit from them, Backbite,
London, 2012.
4
G. Prins & S.Rayner, “Time to ditch Kyoto”, Nature, vol 499, 25 October 2007, pp 973‐5,
republished in (eds) S. Rayner & M. Caine, The Hartwell Approach to Climate Policy, Routledge,
August 2014, pp 221‐26. The Lima COP20 failed in exactly the same way. The only occasion
when a COP has been significantly different was the Durban COP17 in November 2011. This wasdue to the Japanese coup de main announcing refusal to subscribe to a Kyoto successor regime,
which jolted the proceedings into recognition that the top down targets and timetables
approach was fatally flawed. See also footnote 5 for the Korhola reference and comment.

9

IEEJ : April, 2015 All Rights Reserved

which have a troubling historical resonance with the rhetoric of authoritarian
rulers in planned economics, for even more stringent pursuit of the failed
policies: for the Triumph of the Will over recalcitrant economic facts as used tohappen in Command economies: for there to be higher targets in the next Five
Year Plan for tractor production as the response to the complete failure to build
tractors in the one just ended. Or it has been until now. In September 2014,
signs of a major change in EU priorities appeared and were confirmed when the
Juncker Commission was confirmed in power and the October 2014 EU Council
meeting took place.
What is actually going on? To explore that let us first establish the historicalcontext of EU behaviour. We shall examine the declared major public policy
initiatives since 2006, and see what has happened to them since then.
Thereafter a review of the early days of the Juncker Commission and its
approach to climate and energy issues, as it may be deduced from actions, will
be given. It is situated against a brief review of some salient aspects of theinternational and geo‐political context within which these apparent changes inpriority are occurring, in order to understand why climate policy seems to be
being so sharply relegated. This will permit foreign parties to make a more
informed judgement in deciding what weight to place on which aspects ofBrussels’ words and actions: and on those of European states.

THREE CENTREPIECES OF EU ‘CLIMATE ACTION’ AND ENERGY POLICY
For a period of a few years as part of its constant ambition to centralize powers
and to boost its popularity, EU policy was to burnish the Union’s claim forleading status as a “progressive” force on the world stage by presenting itself as
world leader on dramatic, eye‐catching and (it was hoped by Brussels) crowd‐
pleasing ‘climate action’ policies. The high point of this effort was in 2006‐09.
The three centrepieces were, respectively, the 20:20 (later 20:20:20, now 2030)
policy, the promise of ‘green growth’ (of which the 2009 EmployRES study wasa predictive study) and the creation of a carbon market – the Emissions Trading
Scheme (ETS). ‘Green growth’ was supposed to be the carrot. ETS and the
Perfect Vision policies (see explanation below), the stick.

THE EU CARBON TRADING SCHEME – A BROKEN STICK

10IEEJ : April, 2015 All Rights Reserved

The carbon market has never achieved sustained take‐off, crashing repeatedly.
From a high of 32 euro, in 2008 permit prices fell from 25 to 5 euros. It slumped
again to its lowest level of 2.81 euro in January 2013. Currently it claims to be
flying; but its volatile nature suggests that caution is in order because it only
flies on constant life support and in the face of market forces.
In theory emissions trading is an ingenious idea; and there have been somesuccessful applications when applied locally to ‘tame’ problems, such as
pesticides in the USA. But in practice the EU ETS has never had a chance toprove itself.
It is an artificial market because its main animator is political manipulation.
Evidence for this is that the January 2013 slump was above all an instantresponse not to any real world factor but to a European Parliament vote toresist a Commission attempt to rig the market.5
As constructed, of course it does provide juicy rent‐seeking opportunities forlobbyists, brokers, ‘green’ energy boosters and a chorus of ancillary arms‐lengthtax‐funded entities such as The Carbon Trust. Such behaviour is quite normal.
It is just what Charles Mackay predicted in 1841 in a famous study of the Dutch
Tulip Mania, the South Sea Bubble and the Mississippi Project – all earlier
examples of bubble markets.6
ETS is a mess. But at least it is technologically neutral. However, it never had achance to succeed since the 2009 Renewable Energy Directive tied the market’s
hands in finding low carbon energy. These two EU flagship policies contradict
each other. The market is distorted by excessive national renewables subsidies.
5

The market price of CO2 was very low, due to the recession and to the Renewable Energy
obligation. There was a large surplus of ‘tradeable permits’ lying on the market. To try toincrease their value, the Commission sought to use its power as in effect a central bank for thisstrange currency, by ‘backloading’: that is by withdrawing half the permits from the market.
The EPP majority group in the European Parliament, guided by Finnish MEP Eija‐Riita Korhola,decided not to support this intervention and the January 2013 slump was reaction to theirsuccess in the ITRE Committee. This was challenged in the Environment Committee, andreversed the following month. But then it was reversed again back to the EPP original positionin the Parliament in April. All forms of external lobbying was then deployed by the Commission
and the environmental NGOs – including the Prince of Wales, Catholic Bishops and others ‐ toreverse that reversal and to cut the over‐supply of permits, which was successful. But thetroubled ETS has only flown falteringly since because the market knows to what degree it ishostage to such effects; and it remains a victim of contradictory policies. I am indebted to Dr
Korhola for this account which is fully rehearsed in her analysis of EU climate politics,
informed by her unique perspective as a central actor in the EU and UNFCCC COP processes,
in her PhD: “The rise and fall of the Kyoto protocol: climate change as a political process”
Faculty of Biological and Environmental Sciences , University of Helsinki, November 2014.
6 C Mackay, Extraordinary Popular delusions and the Madness of Crowds, Richard Bentley
Publishers, London, 1841

11

IEEJ : April, 2015 All Rights Reserved

It is not well understood that the RED cuts right across the ETS and is part of
the reason that it has failed. Few people realise that the renewables targets do
not add any saving to that guaranteed by the ETS, since it is a cap as well as aguarantee. RED only adds costs (i.e forces the market to adopt an expensive
way of saving emissions as opposed to a less expensive one).
Outside the circle of its promoters, there is no longer expectation that the EU
model will be copied world‐wide. The show‐down over the EU’s attempt toimpose carbon permits on airlines in 2011‐12 (when it was forced to retreat or
accept grave damage to Europe’s air transport industry and links) was perhaps
the defining moment.7 The blocking of the Obama Presidency by theNovember 2014 mid‐term elections will ensure that the California carbon
market experiment will not prosper more widely, either. By early December it
had become clear that the incoming Congress will use a portfolio funding billapproach to block, for example, any of the President’s ‘climate action’ fundingpromises at the Lima COP20.8 Conversely, in the early New Year Obama
threatened to veto the Keystone XL pipeline bill now passed by both Houses
who nevertheless lack sufficient votes to overturn a Presidential veto: so it isstalemate.
The carbon price issue has now returned to national decision. Some havedecided to act unilaterally. The UK’s introduction of a Carbon Price Floor thatis above the current EU price is having a dampening effect on UK
competitiveness just at a time when it has begun to improve at a faster rate
than anywhere else in Europe. The CPF also discourages new investment in gas
capacity because it has dampened any incentive for new investment in the
power sector. This materially increases the risk of power black‐outs (nowestimated to be between a 12‐25% probability). This comes in combination with
the EU Large Combustion Plant Directive which will close five coal fired power
stations in Britain 2013‐15. With unrelated failures in two nuclear base‐loadstations and a serious fire at one of the major gas‐fired base‐load stations(Didcot), the National Grid therefore predicts a precarious supply safety marginof 2% for the 2014‐15 winter. The British Government has sanctioned
extraordinary measures to try to avert the politically suicidal possibility of the7

The forced retreat of the Commission on its ambitions to be a global leader over the aviation
emissions issue is described and analysed in Korhola, “The rise and fall of the Kyoto Protocol..”
Ch 8, PhD University of Helsinki November 2014
8
R.Darwell, “Obama puts climate on the 2016 ballot”, Wall St Journal, 2 December 2014.
http://www.wsj.com/articles/rupert‐darwall‐obama‐puts‐climate‐on‐the‐2016‐ballot‐
1417478450

12

IEEJ : April, 2015 All Rights Reserved

lights going out by allowing lucrative payments to re‐activate moth‐balled oil
and gas stations and to retain coal stations in the mix. However, the failure to
reactivate one of the larger moth‐balled stations (at Peterhead in Scotland)means that the winter safety margin remains precarious.
Belgium was also looking at a tricky winter because of nuclear station faults.
None of this takes account of the continuing possibility of gas blackmail by Mr
Putin. Austria had already signalled in mid September the first significant drops
in delivered Russian gas as against ordered quantities. The Baltics are in Putin’s
cross‐wires and vulnerable to energy blackmail. The wider context of gas andoil geo‐politics will be given below.
Meanwhile the EU 2030 plan fosters an ambition to try yet again to support theartificial market of the ETS by proposing a “market stability reserve’ buffer fundto be in place for the next ETS trading cycle from 2021. That requires bothmoney and political will. It is not clear that either will be forthcoming.

THE EU ‘GREEN ECONOMY’ – A CONSTANTLY RECEDING CARROTA constantly asserted and repeated claim is that the policy‐driven switch to
low‐density, intermittent fuels will stimulate a ‘green economy’ in the EU. The
claim was famously asserted in the 2006 ‘Stern report’ at the apogee of ‘climate
action’ politics. The report was published to great media and politicalacclamation and to immediate academic dissection and dismissal from which it
has never recovered.9
In 2009 the EmployRES study, commissioned by the EU, published very
detailed predictions of the job‐creating potentials of ‘green’ energy which were
found to be positive for nearly all EU countries, the UK being an interesting
exception, showing positive gain under only one of the seven scenarios.
Claiming to be the first comprehensive macro‐economic study of theemployment effects of renewable energy deployment in the EU, it concluded,with high confidence, that “…the current high economic benefits of the RES
sector can be increased in the future… if support policies are improved tostimulate innovative technologies appropriately (sic)…”10 EmployRES scenarios
9

W.D. Nordhaus, “A Review of the Stern Review on the Economics of Climate Change,” Journalof Economic Literature Vol. XLV (September 2007), pp. 686–702
10
EmployRES: The impact of renewable energy policy on economic growth and employment in
the European Union, p.195.
http://ec.europa.eu/energy/renewables/studies/doc/renewables/2009_employ_res_report.pdf

13

IEEJ : April, 2015 All Rights Reserved

assumed that the EU would benefit from major export possibilities. As things
have turned out, this has proven to be flawed.
However, assuming this hypothetical global export market, significant high‐points were predicted for Germany on the further assumption that the German
solar industry would retain world market dominance. Spain was also predicted
to have solid employment gains. Yet the German solar industry has been
undercut by the Chinese (as evident in the bankruptcy of Q‐Cells in April 2012
– then to be bought out in a fire‐sale by Chinese money). The reduction ofGerman feed‐in tariff subsidies was an important ingredient of the collapse,
underlining the artificial nature of a market that cannot live without such
subsidy support.
The collapse of the Spanish renewable energy market after Prime Minister
Rajoy’s government shut off the subsidy regime in January 2012 was even more
dramatic and is particularly relevant to assessing the present moment. The
share price of wind‐turbine manufacturer Gamesa crumbled as did that of T‐
Solar Global, the solar park operator. Companies that had grown quickly big on
the $69bn subsidy‐fed renewable boom in Spain since 2004 were now shut outof their domestic markets.11 “They destroyed the Spanish market overnightwith the moratorium,” European Wind Energy Association Chief Executive
Officer Christian Kjaer said in an interview. But his mind was on contagion.
“The wider implication of this is that if Spanish politicians can do that,probably most European politicians can do that.”
The priority for the Rajoy government lay in the ruined public finances andsoaring youth unemployment that it inherited. It had to prioritise its public
spending ruthlessly. Deployment subsidies for renewable energy lost out toother more traditional demands. Mr Kjaer was right to worry for the safety of
his special interest group. The lesson is to be recalled as Europe at large – andespecially Germany – faces simultaneous and interwoven crises for 2015.
The bullish predictions for the job‐creating potentials of the policy‐driven
adoption of renewable energy generation and of energy‐saving devices in
EmployRES have been quietly sidelined.12 The survey has never been repeated,
as it was expected that it would be.
11 http://www.bloomberg.com/news/2012‐05‐29/spain‐ejects‐clean‐power‐industry‐with‐europe‐precedent‐energy.html
12 The clearest presentation of the ambitions of EmployRES, which shows how far from therealities of 2014 those 2009 aspirations for Europe leading the world’s ‘green’ economic

14

IEEJ : April, 2015 All Rights Reserved

However, the postulate lives on that renewable energy investments will be goodbusiness simply because one attaches a moral importance to doing it. It is to befound in the latest blue chip panel to claim that the proposed policy and pricerise driven energy transition will be either costless or profitable in current
timescales. Professor Nicholas Stern muddled the wish with the act in his
eccentric assumption of a zero discount rate in the 2006 ‘Stern Report’ which
forgets that things are more likely to change in the future than to remain as
they are today and in particular (as the 2014 IPCC AR5 reminds us) that by 2050
people will be on average much wealthier than we are today. He sits as co‐chairman and prime mover of the new panel which repeats this error. The
September 2014 Calderon/Stern report also fails to grasp the nature of the
problems that ‘green growth’ must surmount to succeed.13 At root, it does notunderstand why energy is unlike other inputs into economic activity.
Reviewing “Stern 2.0”, the economist Richard Tol summarises Stern’s second
iteration of his 2006 arguments: “The new report makes three claims, none ofwhich stand up: that climate policy stimulates economic growth; that climatechange is a threat to economic growth; and an international treaty is the way
forward.”14 Launched with huge fanfare, “Stern 2.0” had no evident impact andhad vanished from discussion by early 2015.
In particular, such accounts are misled about the assumption that economic
growth can be maintained by factor substitution and successful technologicalinnovation in the face of rising energy prices.15 Also, Tol wonders whether“…perhaps Stern 2.0 mistook rent seeking for wealth creation”?

WHAT REALLY LINKS ENERGY AND WEALTH: INTRODUCING ‘THERMO‐ECONOMICS’transition actually are, is in J. Constable, The Green Mirage, Civitas, 2011 upon which analysis
the previous paragraphs also rely.
13
Better Growth: Better Climate: The new climate economy report, The synthesis report, (hosted
by WRI) Sept 2014 (Publication of this summary report precedes the full exposition which iscommon in stealth issue advocacy.)
14
All the academic criticisms of Stern’s assumptions are conveniently collected in P.Lilley,
What is wrong with Stern? The failings of the Stern review of the economics of climate change,
GWPF 2012; R.Tol, “Stern 2.0 takes climate policy analysis to a new level of exaggeration” The
Conversation, 19 Sept 2012, https://theconversation.com/stern‐2‐0‐takes‐climate‐policy‐analysis‐
to‐a‐new‐level‐of‐exaggeration‐31763
15 On the latter point see A. Turner, Just Capital, Pan Books, London, 2001, p 286 cit J.
Constable, “Thermo‐economics: Energy, entropy and wealth,” Economic Research Council, Vol
44 (2) Summer 2014, p.5

15

IEEJ : April, 2015 All Rights Reserved

In his seminal new work which introduces the concept of ‘thermo‐economics’,
John Constable returns to the nineteenth century origins of economics. He
observes that for a century and a half the labour theory of value has focussed
attention on that particular transformer of energy into value above all others.
However, he explains, it is both an incomplete but also an obscuring account.
The revealing clue lies in W.S.Jevons’ introduction to his path‐breaking book
The Coal Question in 1865. In it, Jevons makes convincingly the case that “coalin truth stands not beside but entirely above all other commodities. (Emphasis
added.) It is the material source of the energy of the country – the universal aid– the factor in everything we do. With coal almost any feat is possible or easy;
without it we are thrown back into the laborious poverty of early times.”16
As Constable explains, today’s capital stock of goods and structures is best
understood as rendered (that is, materially solidified) energy expended in thepast. High‐density fuels liberated mankind from “laborious poverty.” Jevons’combination of adjective and noun is very apt. The escape from poverty is
impossible without first a release from the tyranny of time‐consuming work.
Wealth accumulates as a result of the time set free, skills empowered andcomplex goods thus resulting by converting low entropy fuel (coal) to highentropy products of combustion: in Constable’s words, “previous energy
consumption is rendered in the current state of affairs as the improbablecomplexity that we value.”17
The central question today is whether anything has changed. To assess this, it isimportant to grasp just how unusual the ‘zero carbon/green growth’ project
really is. It attempts something that has never been done before in humanhistory. In the search for sufficient usable power with low or zeroenvironmental impact to drive modern societies the plan is to transition
backwards from dense, constant and cheap (currently 98.4%) to thin,intermittent and costly (1.6%) primary energy sources ‐ and to reverse thepercentages ‐ while aiming to produce high quality (electric) dispatchable
power from them by a process of concentration of energy. Furthermore, theplan is to force a policy‐driven fast transition against the price gradient while
maintaining positive economic growth; and to get spontaneous adoption of

16

W.S.Jevons, The Coal Question: an inquiry concerning the progress of the nation and theprobable exhaustion of our coal mines, 1865, General Books, Memphis, 2012, p.2, discussed at
Constable, Thermo‐economics, p.7
17Constable, Thermo‐economics, pp 8‐9

16

IEEJ : April, 2015 All Rights Reserved

these sources. Such a project is indeed heroic in its assumptions about what is
possible by persuasion rather than brute force.
The point is best appreciated concretely and in an historical perspective, bycontrast with the last energy transition. Sir Tony Wrigley, one of the pioneersof the Cambridge Population History Group (Campop), elegantly summarises
the achievement of the English industrial revolution in a flow diagram. It
illustrates how the first industrial revolution achieved ‘escape velocity’ from theconstraints of photosynthetic power and illuminates just what Jevons meant by
the escape which coal provided from the ‘laborious poverty’ of the organic
economy to which the green idealists would now return us.

This diagram shows the operation of the organic pre‐industrial economy andthe escape route into unconstrained growth. In the organic economy, all thelinks are positive except one. Whereas Wrigley reminds his readers of theastonishing success with which the agricultural revolution in England
mobilised tractive power by growing oats to feed the horses who provided it,
both to drive the revolution in biomass productivity per unit of land throughland improvement and to feed the growing urban population, the link between
pressure on land and real income per head, is ultimately negative. It shows the17

IEEJ : April, 2015 All Rights Reserved

self‐limiting restraint on growth in the closed system of an organic economy
where all power derives from contemporary or relatively recent and hard to
replace (wood and charcoal) photosynthesis. What permits the energy
transition into economic take‐off is the opening of a route which circumventsthe limits on production and use of photosynthetic energy. That escape route iscoal. It has a positive sign linking the consumption of energy to real income
growth, by‐passing the roadblock of pressure on land. 18
The current proposed energy transition seeks to close the escape route while
retaining the growth trajectory to which we have become accustomed. To dothis it once again has to employ ‘ghost acres’ to grow organic fuels. For one
topical example, responding to subsidy inducements, Britain’s biggest coal‐
fired power station at Drax has converted one unit to wood‐chip firing, using
felled primary forests shipped across the Atlantic from the Georgia wetlands in
the USA. Alternatively, the ‘green’ energy transition has to rely on
uncontrollable generators for base load power. The improbability of sustainablesuccess in its own terms is immediately evident, most especially when the needfor high energy embedded energy inputs into the manufacture of newcollectors is included in the picture. Therefore it must always be borne in mind
that the sheer ambition of what is being proposed for climate and energy policy
is so great that failure is a likely outcome even if all the policy instruments were
to work.
A vital new insight follows from Constable’s assessment of current policies inlight both of a return to the fundamentals of energy economics and of thehistory of the first industrialisation. Modern society is rich from its legacy ofrendered – embodied – past use of coal and oil, so it can afford luxuries.
Therefore it can, of course, choose to increase its energy costs voluntarily, as aluxury expenditure, by returning to an organic economy. But there will be anegative effect, which, although delayed, cannot be escaped. It may also be themore grievous and less recoverable because of being veiled from sight at theoutset. The UK, Constable reminds us, will be adding £8bn per year extra to its
electricity costs by 2020 in order to satisfy the EU Renewable Energy Directive.
Or on a wider scale, Germany can choose to follow an energiewende which is
expected to add 40% to domestic energy bills by 2020, but it is costing 16 bn
euro per year and is already handicapping German industrial competitiveness.

18 E.A. Wrigley, Energy and the English Industrial Revolution, Cambridge University Press, 2010,

pp. 175‐78

18

IEEJ : April, 2015 All Rights Reserved

Our economies can recover from shallow self‐inflicted wounds because of the“…accumulated and inherited wealth … so familiar a background to our daily
activities that we tend to neglect it, or at least we regard it as a minor
contributor to contemporary output.” In similar vein to Vaclav Smil’s path‐
breaking insights on energy and materials, Constable suggests that a forcedenergy transition against the cost gradient drives resources of all necessary
types (land, labour, capital, time and intellectual energy) into the energy sector
once more, which is inevitably an opportunity cost choice against other capital
accumulation including intellectual invention: hence the need to draw on
accumulated surpluses. So during the first phase of such a process – theGerman energiewende for example – the degree to which the general economy
is poisoned is not noticed. Why? Because slowing or stopping the current
margin of accumulation is compensated by withdrawals from the savings bankof the past capital stock, built up on cheap energy. But that savings account is
not infinite. Germany is determined to remain a major manufacturing andexporting economy, but is hurting itself gravely by this insidious poisoning.
About half of domestic bills is now accounted for in taxes and ‘green’ subsidies.
In late November a major sign came with the decision of E‐ON the German
energy giant to split its operations in two so that it could concentrate on rent‐
seeking profits from the energiewende while cauterizing losses in theconventional power sector. RWE, in contrast, has invested in large scale coal
opening its newest plant at Hamm outside Dusseldorf this month. 19 These are
not signs of coherent policy.

CONTRADICTIONS BETWEEN EU PERFECT VISION AND ENERGY SECURITY POLICIESEven in turbulent times, it can be safely predicted that the 20:20:20 and 2030
targets will remain as headline statements of EU policy.
It would simply be too embarrassing to abandon them formally, just as the
British Parliament will probably not repeal the 2008 Climate Change Act even if
it cannot be obeyed. But this does not mean that they will be pursued to theletter – or at all. The January 2014 announcement to withdraw from binding
targets is in fact a veiled admission of error in having tried to impose the RES;
19

Constable, Thermo‐economics, pp 11‐12; D.Fortson, “Europe winds back the clock onwindmills”, The Sunday Times, 23 November 2014,
http://www.thesundaytimes.co.uk/sto/business/energy_and_environment/article1486674.ece;
Reuters, “E.ON to quit gas and coal and focus on renewables” The Guardian, 1 December 2014,
http://www.theguardian.com/environment/2014/dec/01/eon‐splits‐energy‐renewables

19

IEEJ : April, 2015 All Rights Reserved

but it cannot be said out loud, although the out‐going Energy Commissioner
Gunther Oettinger did break ranks a week after the policy was launched todescribe the 2030 target as both unachievable and foolish.20
20:20:20 ‐ the climate and energy package ‐ is “a set of binding legislation whichaims to ensure the European Union meets its ambitious climate and energy
targets for 2020.” It stated thatthese targets, known as the "20‐20‐20" targets, set three key
objectives for 2020: A 20% reduction in EU greenhouse gas
emissions from 1990 levels; raising the share of EU energy
consumption produced from renewable resources to 20%; a
20% improvement in the EU's energy efficiency.21
That is a lot of twenties. Why? Its evolution is instructive. As it happened theauthor was in Brussels when the original 20:20 target was agreed (that was a
20% cut in greenhouse gas emissions by 2020). Hearing the clinking ofchampagne glasses is an adjacent room, he learned that this was delegates andstaff celebrating the achievement of agreeing the policy. How had it been
arrived at?
By analogy: 20:20 denotes perfect vision when eyes are tested by anophthalmologist. The PR people and spin‐doctors liked that subliminal
message: the EU has good eyes too: be confident! It has perfect vision. So a
spuriously precise target was agreed with no meaningful reference to technicalassessment of feasibility. Indeed, so satisfying was 20:20 that soon a third 20(on percentage of renewable energy) was added.
Such an insight tells us that the policy may not have been adopted solely – oreven principally – for its own sake. This rhetorical gambit is widely mocked,
and undermines credibility. As Professor Dieter Helm has said, repeatedly, theproblem is that no one believes that the targets are realistic. Even theCommission’s own words betray their own flippancy.
Rent‐seeking special interest groups can be expected to support any policies
which fill their boots; and so long as there was a political advantage to the EU
in its scramble for legitimacy among European voters, and prestige on theworld stage, the huge priority given to climate policy in the last year of the2021

http://www.euractiv.com/energy/oettinger‐rallies‐opposition‐203‐news‐533084
http://ec.europa.eu/clima/policies/package/index_en.htm

20

IEEJ : April, 2015 All Rights Reserved

Barosso commission, whose plans would have made this one of the majordemands on EU tax income, could be justified.
But if either of these assumptions turn out to have changed? This may explain
in important part the background to the major reversals of policy implicit in
the events of September 2014.
In January 2014, the Commission presented its proposals for the next policy
round after 20:20:20. The 2030 policy ramps up the targets: 40% reduction ofgreenhouse gases from 1990 levels by 2030; 27% of EU energy to be fromrenewable sources by 2030; energy efficiency to be increased by 30% by 3030.
Once again, that pleasing symmetry of numbers that spin‐doctors love.

However, there is an important difference in governance from its predecessor,
which introduces a revealing incoherence. Whereas the previous regime was tobe imposed on the nations at EU level by “binding legislation” (whatever thatis) in 2030 the execution is devolved to nation‐states who may (or may not)wish to effect it to meet a non‐binding target at EU level.22 The EU Council
meeting of 20‐21 March agreed to take a view on the 2030 policy framework by
October 2014 at latest. It was adopted at the Council, but in effect the signal
was present in the drafting, as just noted.
Repeating his January dissidence once more, as his tenure as Energy
Commissioner drew to a close and a new post as Digital Economy
Commissioner in the Juncker Commission beckoned, Günther Oettinger called
for conditionality. He argued that a position similar to that being taken by the
Abbott government in Australia would be prudent. “If there is no binding
commitment [at the Paris 2015 Climate Conference] from countries as India,
Russia, Brazil, the US, China, Japan and South Korea, whose governments are
responsible for some 70% of global emissions, I think it is not really smart tohave a ‐40% target [for the EU].”23 Perhaps such a position would be a prudent
choice for Japan also?

22

http://ec.europa.eu/clima/policies/2030/index_en.htm. This, of course, is the same salutary
reality‐check which hit the UNFCCC after the failure of the 2009 Copenhagen Summit, andwhich took policy effect with the adoption at the Durban Summit in 2011 of NAMA (Nationally
Agreed Mitigation Actions) as the prime mover for any future action (see further below).
23
http://www.theguardian.com/environment/2014/sep/25/europe‐should‐only‐cut‐carbon‐if‐world‐agrees‐paris‐climate‐deal‐eu‐energy‐chief

21

IEEJ : April, 2015 All Rights Reserved

RUSSIA RETURNS TO OPEN HOSTILITY AND EUROPEAN POLICIES RESPOND
But it may not be decided as a matter of voluntary choice or the outcome ofpolicy debate because other factors intervened, notably Russia in Ukraine. A
watershed in European affairs was crossed on 21 March 2014 when the post‐
soviet era that began with the failure of the coup d’état in 1991 abruptly ended.
As the EU national leaders met in Council in Brussels, also (and probably notcoincidentally) in the Kremlin Vladimir Putin signed Russian ratification of theannexation of Crimea from Ukraine and into the Russian Federation. In
alarmed response, the Council instructed the Commission to prepare an EUenergy security strategy also ‐ and quickly.
After frenetic activity, on 28 May the Commission issued an urgent
Communication which was followed by a more worked‐up Commission staff
study that was released on 2 July, just as the summer holidays were beginning.
This was adopted by the October Council too. 24 2030 energy and climate
policy and the energy security strategy were both on the table. Yet these
documents contradict each other. In fact they read as if coming from different
worlds; and so they do.
Here, to contrast with the 2030 goals cited above, is the introduction to the Julyenergy security working study. Words, concerns and flavour are quite different:
As energy has come to be a vital part of Europe's economy
and of modern lifestyles, we have come to expect secureenergy supplies: uninterrupted availability of energy
sources at an affordable price. We expect to find petrol at
the pumps, gas for heating and, in this computerised era,non‐stop electricity, with blackouts too disruptive tocountenance. We also expect supplies to be affordable.
One is realist, the other is idealist. One is overwhelmingly about high energy‐
density, dispatchable fossil fuels which (as the study’s charts show) supply thevast bulk of the energy needed to support the requirements specified in thequotation. It discusses the geo‐politics of pipelines with a time‐line set by thecoming winter weather. Its policy concerns are about building strategic gas
interconnectors, increasing access to non‐Russian oil and gas markets; reducing

24 http://ec.europa.eu/energy/doc/20140528_energy_security_communication.pdf;

http://ec.europa.eu/energy/doc/20140528_energy_security_study.pdf

22

IEEJ : April, 2015 All Rights Reserved

tax burdens on certain fuels (like diesel); increasing indigenous energy
exploration.
The other is about the low energy‐density, intermittent energy flows thatcurrently cannot remotely sustain the ambitions of citizens as quoted. It is
about increasing taxes (for example on diesel). It offers windy aspiration and no
stimulus for shale gas exploration or exploitation and cites as authoritative
dubious propositions about what is economically beneficial and achievable.
Reports and personalities are brandished for their prestige, in the manner thatthe status of oath‐swearers ‐ not the quality of their evidence ‐ settled cases in
the Anglo‐Saxon witenagamot.

Shortly, before winter set in, a formal choice was made between these two
approaches. The evidence is that it probably had been done in the Commission
well before. With Mr Putin’s help it had discovered some harsh truths of power
politics. The simultaneous endorsement of the toothless 2030 climate action
policy and the vigorous energy security plan by the October EU Council
confirmed that the lesson was learned in the national capitals also.
In contrast, as will now be discussed, the reaction of NGOs and of somemembers of the EuroParliament showed that they were still living in theprevious era and were prepared for a confrontation with the Juncker
Commission which could lead to poker over the endorsement of someCommissioners, including Miguel Arias Cañete, whose nomination for the new
combined energy and ‘climate action’ portfolio by Commission President Jean‐Claude Juncker was announced on 10th September 2014. The fact that theenvironmentalists, the Parliamentarians much Press, and a huge social media
campaign to block Cañete were rather brutally squashed and swept aside is ameasure of the transformation of EU priorities that occurred over 2014.

PEOPLE CHANGE IN BRUSSELS
Although the EU is a deeply bureaucratic organization, personalities can beimportant. This was certainly the case in the Barosso cabinet. The priority to beaccorded to climate issues was signalled bureaucratically in the fact that the
subject had its own power base in a commissioner and her new department(Directorate General) and – crucially – funds to sustain lobbyists, NGOs andsubsidies. But its prominence as a leading edge issue in EU policy was in

23

IEEJ : April, 2015 All Rights Reserved

considerable part ensured by the vividness of the personality of theCommissioner, the former Danish Environment Minister Connie Hedegaard.
Mrs Hedegaard was the youngest MP in Denmark when first elected at the ageof 23 in 1983. In August 2004 she was appointed Danish Minister for theEnvironment. In 2007 she was in charge of setting up the Danish Ministry of
Climate and Energy, where one of the main tasks was to prepare theunsuccessful UN Climate Conference in Copenhagen in December 2009.
Ms Hedegaard had been the local chairman of the most dysfunctional in thehistorically unusual series of UNFCCC summits. The UNFCCC summits are
dysfunctional because there is such a yawning ‐ and probably unbridgeable ‐gap between the power‐political interests of state parties and the rhetoric ofdemands for supra‐national imposed actions. The rhetoric, often hyperbolicand shrill, is confected by alliances of ‘stealth issue advocates’ (NGOs,
sympathetic journalists and researchers, a variety of rent‐seeking industrial
interests) in Professor Roger Pielke Jnr’s memorable and accurate description.25
During its ascendant years, the UNFCCC process had the same evangelical tone
as the Hague Peace Conferences of 1899 and 1907.
After the failure of the Copenhagen conference, the UNFCCC found itself
sailing into ever strengthening headwinds. The Executive Secretary Yvo de Boer
found successive meetings increasingly difficult and emotional and eventually
he resigned.26 At the 2011 Durban meeting, as the present writer was able toobserve, he was like a man released from prison. At last he was able to make
openly the case for abandoning the approach of top down targets andtimetables and to argue for one in which he actually believed ‐ that of NAMA –bottom up Nationally Agreed Mitigation Actions.27
Since Durban, NAMA have steadily advanced as the methodology of choice. A
perceived advantage is that NAMA do not, by definition, make UNFCCC
agreements hostage to ratification by national legislatures which might decline
to do so. Such is certainly now the case in the USA, where a bitter andweakened president confronts an angry and resurgent Congress. However the
disadvantage is that either nothing will happen because there is not national
25

R.A. Pielke Jnr, The Honest Broker: Making sense of science in policy and politics, Cambridge
University Press, 2007, p.7
26
Dr Korhola attended the COP conferences as a delegate from the Milan COP in 2003. She
analyses them all as a series, Ch 2 “The rise and fall of the Kyoto Protocol…” PhD Nov 201427
At the Lima COP20 NAMA appear to have been enlarged to encompass “INDT” (Intended
Nationally Determined Targets).

24

IEEJ : April, 2015 All Rights Reserved

will to do anything or that executives that seek to impose unpopular measures
without perceived legitimacy will simply further alienate the circumvented
legislators and the voting public. It is suggested that the Lima COP20 should beassessed in these terms only. Expected demands from poor countries that richcountries must fund fully the $100 bn p.a. promise rashly made by Obama at
Copenhagen (less that $10bn of which has been subscribed to date) form one
rock on which hopes for a workable successor to the Kyoto Protocol will bedashed. Indeed both Su Wei the Chinese chief negotiator and India’s delegation
played this card early and the BASIC group seemed to be co‐ordinating its
demands. The other is that neither a lame‐duck US President nor a deeply
divided EU can be expected to deliver real funds at anything like this level. For
early example, Prime Minister Cameron faced bitter domestic criticism forauthorizing already ear‐marked funds in the British international development
budget. So the words really lack credibility. In such circumstances, NAMA offer
a useful way to appear to commit to action while knowing that they cannot bedelivered.
A similar but tacit recognition has been seen in the EU policies with, as noted
above, a move from ‘binding legislation’ as the motive force of 20:20:20 to arecognition of the sovereignty of nations in the 2030 policy. During this same
period 2010‐14, Ms Hedegaard’s DG came increasingly into conflict with thatconcerned with EU energy policies, headed by Günther Oettinger. This wasplainly both a ‘turf war’ between rival bureaucracies but was also a clash of
personalities and it came to be a noted feature of the closing years of the post‐
soviet interlude in international affairs. Visible public disagreements, noted
above, were in January and September 2014. The point at issue was that during
the last years of the Barosso commission, the ability of the Hedegaard agenda
to occupy the central prominence which it has earlier had, waned.
At things stand at this writing, it is probable – and even on balance likely ‐ that
she will have been the EU’s first and last Commissioner for ‘climate action’.
Hedegaard was an unusual Commissioner, coming from an EPP backgroundbut then ‘getting religion’ on green issues. She did not receive a second term
not least because the EPP would not have supported her any more.
But the current changes have deeper drivers than clashes of personality. So how
has this come about? In addition to the detailed subject‐specific causes
analysed above, two contextual circumstances have changed sharply. Each has
affected the balance of power between DG Energy and DG ‘climate action’ to

25

IEEJ : April, 2015 All Rights Reserved

the detriment of the latter, which, despite the impassioned rhetoric, comesdaily to look more like a voluntary entertainment for easier times.
First, and currently dominating European external and trade politics, is thequickly rising importance of traditional energy security issues as Putin reasserts
Russian hostility to the post‐Soviet settlement of 1991 in a global context where
Middle eastern politics once again complicate European, Chinese (andespecially Japanese) energy security of supply from that region.

ENERGY GEO‐POLITICS RETURN TO CENTRE STAGE
The problem of Putin’s Russia is compounded by the on‐going energy‐
geopolitical civil war between Muslims in the Middle East. Saudi Arabia,
supported quietly by Egypt, Jordan (and Israel), are on the one side. A motley
combination of three camps of totalitarian Islamists stands on the other: threepoisoned branches from the same ideological tree. First there is Iran (running
Hezbollah and, with help from Putin, Assad). Then there is the Muslim
Brotherhood and allies (Qatar, Turkey, Hamas). The third group of Islamists
consists of the Da’esh (ISIL) and Al Qaeda (sometimes fighting each other,sometimes not). At the moment, the Iranian pursuit of the nuclear weapon isthe epicentre of danger to the whole post 1945 world order as well as the region.
But intellectually weak geo‐political analysis in Washington and Europe meansthat the fact that (for the moment), the Iranians also fight our enemies, theDa’esh, makes them seem to be our friends. This has given credence to a P5+1
process which looks likely to produce the worst outcome, namely a leaky andvague diplomatic instrument that cannot prevent breakout. If that happens, allbets for global security are off – which is another subject.
Why this largely misunderstood collapse of the state system in the Arab world
has relevance to this analysis is that it has a potential to compromise European,
Japanese (and Chinese) oil and gas supplies. To lose access on both fronts, at atime when LNG reverse‐piped into the European gas network is an importantpart of the defence against possible Russian gas blackmail, would be a major
problem. Just how seriously this ambitious plan is being developed became
clearer in more detail in February 2015 when details of American plans to
support this defence by aggressive pipeline and terminal construction as well as
encouragement of American companies to bid to build new nuclear plants andto start fracking in Europe, were revealed. Amos Hochstein, the State Dept’s

26

IEEJ : April, 2015 All Rights Reserved

Special Envoy for International Energy Matters, described it as “a chess match”
with Russia trying to block US moves by buying up European pipelines, offering
sweet deals and dark threats.28
Egypt and Israel efficiently damaged the Muslim Brotherhood terrorist cats‐paw, Hamas, during the Protective Edge operations in Gaza over the summer.
Although delayed by President Obama’s chronic indecision, destroying theDa’esh ‘caliphate’ is now plainly beginning, with coalition air strikes on its
power‐base in the ungoverned part of Syria as a first step in military operations.
The oil markets signalled confidence that the August threat in Iraq after theterrorists over‐ran the Mosul oil‐fields, has receded. Since then the Da’esh
have been being contained and pushed back, responding with ever increasing
internet‐transmitted barbarism. The Da’esh is a modern, highly effective
totalitarian and terrorist fantasy on a 7th century theme.
Saudi Arabia and Iran are the two principal state entities in mortal conflict. The
oil price drop must always be viewed through that proposition. “The Spigot” is a
Saudi weapon to cripple Iran. Increasing production in the short term for local
reasons, for example resentment of Iranian exclusion of Saudi interest in the
now collapsed state of Yemen, then developed into a full‐blown policy to try tosqueeze out high‐cost competitors in order to retain OPEC market share.29
Given the source, it is not unreasonable to imagine a coincidence of Saudi‐
Arabian and American interests to see pressure increase on Putin’s regime aswell as on the Iranians. That is not the same as a conspiracy theory, simply aconsequence of market dynamics responding to the loss of Saudi position as
the decisive swing producer, but nonetheless producing a real effect.
That pressure was evident in the 9% collapse of the Rouble on 1 December
followed by the further 10% collapse on 15th despite the emergency rate hike to
17% that day, inflation rise to 10% and the Russian central bank prediction ofdeep recession for 2015. The Rouble has lost half its value against the dollar
28

B Klapper & M Lee, “ US, Russia at odds over energy in Cold –War style conflict,” AssociatedPress, 4 February 2015 See
http://hosted.ap.org/dynamic/stories/U/US_ENERGY_COLD_WAR?SITE=CARIE&SECTION=
HOME&TEMPLATE=DEFAULT
29
This was confirmed in terms by Prince Turki al‐Faisal al‐Saud (former Saudi Ambassador to
the USA and Head of the Saudi Intelligence Service) speaking in London on 2 December 2014.
Professor O’Sullivan of the Harvard Belfer Centre for Energy Geo‐politics is not alone inthinking that the Saudis will neither risk too complete a price collapse, nor succeed insqueezing out US shale. See
http://belfercenter.ksg.harvard.edu/publication/24818/saudis_wont_let_oil_freefall.html and“Sheikhs v shale” The Economist, 6th December 2014, p 15

27

IEEJ : April, 2015 All Rights Reserved

since January 2014. The failure of the central bank’s biggest weapon meant that
capital controls are the only remaining recourse. The White House has made it
clear that it has no intention of lessening the pain for Mr Putin. Sergei Shvetsov,
deputy governor of the central bank said on 17th December that the situation
was ‘critical’: “I couldn’t imagine a year ago that such a thing would happen ‐not even in my worst nightmares.”30
But the West should be careful what it hopes for. Putin cornered could bemuch more dangerous than he has already been. The upsurge of renewed war
in Ukraine in early 2015 may be seen as evidence of that. After successes in
Crimea and eastern Ukraine, in August Putin escalated the classic KGB tactic ofdeniable intervention (called ‘hybrid warfare’ by some). He has the measure of
the present Western leadership which under the limp hand of President
Obama is timid and tardy in the use of force or of forceful diplomacy. This wasplain especially after the weak response to the shooting down of the Malaysian
airliner MH‐17 by Russian‐backed rebels in eastern Ukraine on 17 July, using a
sophisticated Russian Buk high altitude anti‐aircraft missile. He plays double orquits. To date, he has guessed correctly that no European leader has thestomach to call his bluff and for the moment has broadly succeeded in his
objective to set the terms of Ukraine’s relations with the rest of Europe.31 The
resumption of major war in eastern Ukraine in February 2015 and Mrs Merkel’s
prudent advice that people should be prepared for the failure of the desperate
diplomatic efforts of herself and President Hollande, serve to underscore this.
However, the steep and continuing collapse of the Rouble and the underlying
failure of the Putin years to achieve any significant diversification into a non‐oil
economy put Russia in a very weak position. Since 2000 Russia’s Real Effective
Exchange Rate (REER) has doubled and the proportion of GDP represented by
non‐oil exports has fallen from 21% to 8%. The trillions of dollars of high‐priceoil revenue have been bled off in corruption and waste. This puts Putin is atight corner; but with very high public approval ratings, the temptation topresent his mismanagement of the Russian economy as the consequence of awestern plot may be irresistible. Certainly Mrs Merkel’s terms for lifting
sanctions by termination of Russian backing of dissident eastern Ukraine are30“Russian financial crisis looms as rouble turmoil causes global jitters” The Financial Times, 17
December 2014,31“Win some, lose more: How the West lost Ukraine,” The Economist, 20 ‐26 September 2014,
pp 39‐40

28

IEEJ : April, 2015 All Rights Reserved

not acceptable to him. The collapse of the rouble is the biggest currency rout ina generation. The full extent is not yet evident but the dynamic is plain.
It is against this background, in the face of this coldly calculating enemy, thatthe energy security policy became one of the top priorities of the Juncker
Commission when it came into power in November 2014. It will not beinterpreted in its own terms alone, but closely correlated with the visibly
hesitant European moves towards applying more stringent systemic (‘Tier III’)economic sanctions on Russia (which do not allow Russian companies access tointernational lending for longer than 30 days, thus forcing them to fundborrowing roll‐over in dollars or euros with Russian central bank reserve
foreign reserves. Rosneft’s need was the immediate trigger of the December
crisis32). There is much fear in Germany, France and Italy that such sanctions
could damage their export markets at a time of great fragility in the Eurozone
economy. Therefore it is noteworthy that the EU sanctions package has beenskewed towards denial of Russian corporate access to global financial markets,
which will damage disproportionately the City of London’s interests. In the eyesof many in Brussels, that is seen as an additional advantage to the package.
The blight of Putin is therefore directly linked to a second dominant contextual
factor via the weakness in the Eurozone economy: the baleful return of theEuro crisis after two years of temporary reprieve. This and nothing to do with‘climate action’ is the dominant strategic risk facing the EU entering 2015.

THE DEEPENING CRISIS OF THE EUROPEAN SINGLE CURRENCYIn London on 26 July 2012, Mario Draghi, President of the ECB, had promisedthat “…the European Central Bank is ready to do whatever it takes to preserve
the euro. And believe me, it will be enough…we think the Euro is irreversible”.
That speech was made with the full agreement of the German finance ministry.
But by the autumn of 2014, the effect of those promises is dissipating fast. The
Euro has continued to weaken steadily against both the Dollar and Sterling
during the last three quarters. (Sterling had a 5% wobble before the Scottish
Independence referendum from which it quickly recovered after decisive

32

Sergei Guriev, “ “Russia is heading into an economic storm without a captain” The Financial
Times, 17 December 2014 explains the significance of the Rosneft detonator to the rouble
collapse.

29

IEEJ : April, 2015 All Rights Reserved

rejection of the break‐up of the United Kingdom and at year’s end was trading
at a four year high).
Against the Yen, the picture has been less clear‐cut because of the different but
continuing challenges within the Japanese economy arising both from its sharp
post Fukushima deterioration of balance of payments surplus and the difficultyof making the ‘Abenomics’ stimulus self‐sustaining which, at this writing, looks
increasingly difficult as Japan returns sharply into recession. Whether Mr Abe’s
renewed December mandate from a sullen electorate will give him sufficientleverage to reverse these trends is not at all clear. Therefore the incentive forthe renewed Abe government to follow Mr Juncker’s example (see below) by
dumping quickly the expensive luxury of technically marginal or actuallycounter‐productive ‘climate action’ policies may be compelling.
Returning to the recent history of the current European financial crisis, in aworld where the Eurozone has stubbornly failed to move to any credible
recovery, stuttering along with minimal or no growth, where markets mistrust
equities and are prepared to buy the safety of German Bunds at negative real
rates of return, Draghi’s 22 August 2014 speech at Jacksons Hole was first seen
to be a reiteration of that 2012 resolve.
But crucially, by then, the ECB was in conflict with the Germans. Draghi
seemed to recognize in the Jackson Hole speech that deflationary pressures aretaking hold and he seemed to have switched sides, now supporting thecriticisms made by France and Italy. A distinguished economic and financial
journalist who has the longest track record of success in predicting the vagariesof the Euro crisis, described it as “…one of the strangest episodes in ECB
affairs…one might suspect that he has reached the point of emotional rupture,
too sensitive to continue defending the indefensible, aware that the Project isbeyond saving. He already looks like a man preparing for his new destiny inRome as Italy’s salvation president.33 Italy at this writing is still 9% below its
2008 GDP, with a contracting economy and facing a debt trap. In the past,
repeated devaluations of the lira permitted export‐led recovery; but inside thestrait‐jacket of the Euro that option is not open. Italian sovereign default, were33

A. Evans‐Pritchard, “It’s wishful thinking that the ECB is about to launch QE,” The Daily
Telegraph, 4 September 2014, p B2

30

IEEJ : April, 2015 All Rights Reserved

it to come, would be a detonation sufficient to blow the Eurozone apart. So
should he return to his homeland, Mr Draghi will have his work cut out.34
Whereas President Napolitano confirmed that he would leave post at the end of
the year because of old age after an unprecedented second term, Mr Draghi’s
moment is not yet. Were Mr Draghi to leave the ECB at the present fragile
moment, of course it would shatter market confidence in the single currency
overnight. Instead the crisis stumbled through two further stages during
November.
First, on 5th November, Draghi tried to defy the Bundesbank by bouncing the
ECB into a trillion euro stimulus without the acquiescence of either German or
the northern creditor bloc. The split between North and South was gaping.
Rumours about the ECB meeting included allegations of a stormy row betweenJens Weidemann of the Bundesbank and Draghi and accusations that papers
were withheld from German members of the Executive Board to prevent themhaving prior warning to obstruct Draghi’s QE initiative. Reuters reported on 6ththat the attempt was made in defiance of an explicit order not to do so, backed
by all Northern Eurozone governors except Belgium and Finland.
Draghi is, of course, correct to try to stimulate the Eurozone. But the November
showdown demonstrated that he was powerless to do so via the ECB at thatmoment. The collapse of investment on the one hand and the political surge ofrejectionist politics across southern Europe are different witnesses to the same
fact. In France Marine le Pen’s Front National is pledged to restore the franc.
She leads the Presidential polls at 30% and her party threatens the FrenchSocialists with oblivion. In Italy the Five Star Movement of Beppo Grillo is an‘anti‐party’ party, yet won over a quarter of the vote in 2013 and is committed to
immediately leaving the euro. The traditional portfolio ideological parties of‘left’ and ‘right’ in Italy are caught in a pincer between the anti‐party party Five
Star and the resurgent regional nationalist Northern League. In Spain, another‘anti‐party’ (Podemos) has swept from nowhere to 28% in a year and calls formassive increases in public spending to support a minimum wage and otherpolicies totally at odds with current ECB strategy. The underlying cultural andpolitical point is developed in the final section below
Therefore at the end of the month, the Juncker Commission made its own
move. On 26th November Mr Juncker unveiled a proposal for a European Fund
34

R.Bootle, “The solution to Italy’s woes is quite simple – leave the euro”, The Daily Telegraph,
22 September 2014, p B2.

31

IEEJ : April, 2015 All Rights Reservedfor Strategic Investment in a speech to the European Parliament at Strasbourg.
Warning that this might be the eurozone’s ‘last chance’ he sought to stimulate
the low rate of investment (2% of GDP ‐ half the US level) with 21bn euro seedmoney which, with associated reduction in red‐tape and a roster of
infrastructure projects, he suggested could leverage up to 315 bn of private
investment. Describing this as a form of alchemy, The Economist was typical of
the financial press in its generally sceptical view of a stimulus package
amounting to 0.8% of EU output over its projected three year span. If this was
the nether mill‐stone, the upper one came in the complaint of German
Economy Minister Sigmar Gabriel that the European Commission's 300 billion‐
euro plan to boost investment in Europe was not big enough and lacked details,
The amount is "not only not enough" but it is not clear what the money will be
used for, Gabriel told reporters in Berlin. "I'm totally against putting up a
stimulus programme," he said, arguing it would be just a 'straw fire' and that at
the end of the day the money would be gone and nothing lasting would comeout of it.35
In any case, with the prospect of an early general election in which the far‐left
Syriza party of Alexis Tsipras, now the second largest party in the Greek
Parliament, was the favourite, December opened with the explosive return of
the Greek political crisis, which is where the current cycle of the Eurozone
tragedy began in 2012 after Mrs Merkel was persuaded not to eject Greece fromthe single currency in late 2011 because of the fear of contagion to Italy andSpain. Tsipras has announced root and branch rejection of the ECB austerity
programmes, a policy which is wildly popular with his electors suffering under
the ravages of poverty and unemployment that the euro has imposed onthem.36 Tsipras said that the markets will “have to dance to Syriza’s tune”. Morelikely, commentators mostly said, Tsipras will be forced to compromise. Butthat will not be without cost and is by no means certain. The snap Greek
election was confirmed at the end of December to be on 25 January 2015 and in
the event Syriza won convincingly. Since then it has become clear that it is by
no means clear that Greece will compromise. On 8th February Alan Greenspan,35

http://www.bloomberg.com/news/2014‐11‐23/how‐the‐eu‐plans‐to‐turn‐26‐billion‐into‐390‐
billion.htm; Charlemagne, “Europe’s great alchemist” The Economist, 29th November 2014, p.38;“Germany says Juncker plan short on cash and details, Reuters, 1 December 2014,
http://www.reuters.com/article/2014/12/01/us‐eu‐investment‐juncker‐germany‐
idUSKCN0JF2IZ20141201
36
G. Christides, “Greek radical left prepares for power under Tsipras”, BBC News, 16th December
2014, http://www.bbc.co.uk/news/world‐europe‐30481307

32

IEEJ : April, 2015 All Rights Reserved

former Chairman of the Fed, pronounced his view that Greece would have toleave the Euro and should do so in its own interest. From this report it will be
plain that the author has never understood how anyone ever believed that apolitical currency project like this could ever survive. It would be historically
unprecedented if it did.
In the rolling drama of the Euro, a deus ex machina entered the stage on 13th
January. Pedro Cruz Villalón, an advocate‐general in the European Court ofJustice, gave a ruling which was taken to allow bond purchasing by the ECB.
Critics of QE were quick to point out that this opinion flatly contradicted theruling of the German Constitutional Court in Karlsruhe. So that struggle is notover yet by any means.37 However, Draghi and the ECB exploited Villalón’s
opinion to bounce Mrs Merkel and to announce a massive programme of QE
for the next 36 months. The announcement was, deliberately one must assume,
only days ahead of the Greek election. This was indeed the ‘big bazooka’; and at
this writing it is not yet clear what targets the first shot has hit.
However, the implication for the ‘climate action’ and green economy agenda ofall this high drama is obvious. Since both depend fundamentally on large
provision of taxpayers’ money, they are unlikely to claim high priority at a
moment when the entire Eurozone economy has been driven into the ground.
Therefore the tension between words and actions within Europe may be
confidently expected to increase. That has two further vital implications forexternal observers trying to assess the European scene.
The first is that the depth of internal division among the European states thatwas revealed during the rough horse‐trading which resulted in the compromiseof a toothless 2030 climate action target at the October EU Council, means that
the EU climate action negotiators in Lima COP20 or elsewhere had such a weakbasis of power to deliver actions that their words must be treated with muchcaution. The second is that the same tensions being present within European
states make it unwise to rely on the deliverability of ‘climate action’ pledges.38
However, there is a further dynamic at the national level because it is there thatthe irresistible need to keep the lights on collides with climate action policy.
The tension is exemplified by the British Dept of Energy & Climate Change,
37

C. Jones, “Legal opinion paves way for ECB bond‐buying programme,” The Financial Times, 16
January 2015 http://www.ft.com/cms/s/0/45850d86‐9bca‐11e4‐b6cc‐
00144feabdc0.html#axzz3R5TEQhUv
38. G.Prins, “The Road to Paris goes via Peru. Unfortunately”, Formiche, Rome, February 201533

IEEJ : April, 2015 All Rights Reserved

described to the author by a member of the current British Cabinet as a place
where “every morning one half of the civil servants come to work to try to turnthe lights off and the other half to try to keep them on.”The primary instrument of Policy is control of investment, either by
inducement with subsidies or by direct investment. So there is an inherent
momentum that cannot be quickly changed once investment priorities inenergy generation have been changed. That momentum has been developed byten years of ‘climate action’ priority. Now it is coming into brutal collision withhigher political priorities of energy security and price. So in consequence bothof this and of the changed geo‐political scene described hitherto in this report,
it has become much more difficult during the last six months to be able topredict which way the coiled springs of these domestic and international
tensions will flick energy policy priorities in different countries in coming
months and years. This is the subject of the final section of this report. But
before we turn to it, we need to draw together the implications for ‘climate
action’ and energy policy of the recent revolution – not too strong a word – inBrussels occasioned by the Juncker Commission.

IMPLICATIONS OF THE PROCEDURAL REVOLUTION OF JUNCKER’S COMMISSION
Even before the Eurozone shocks of November, the rouble crisis of mid
December, the return of the Greek crisis at year’s end, Syriza’s conclusive
victory, huge Podemos street demonstrations in sympathy in Madrid, therenewal of war in eastern Ukraine in February and the crisis in Western
leadership that has deepened because of Obama’s erratic conduct had
reinforced the message about priorities, the EU was in the midst of sudden andsevere cultural and political crises of its own. Responding to all these, Mr
Juncker announced a re‐structuring both of the portfolios and the function of
the EU Commission. His changes retrench its concerns to core traditional
issues and centralise decision‐making; and the November‐February crises serve
to embed them even more strongly.39
The Juncker Commission is much more autocratic in its structure than its
predecessor. Commissioners have lost autonomy of policy‐making. They aregrouped under Vice‐Presidents. Only Vice‐Presidents will be able to put policy
proposals onto the Commission’s agenda. A First Vice‐President is the next39

http://ec.europa.eu/about/juncker‐commission/structure/index_en.htm

34

IEEJ : April, 2015 All Rights Reserved

filter and only then will the President decide. There is a distinctly Soviet feel
about both the process and the names which is perhaps not surprising because
the process is unselfconsciously authoritarian.
Juncker has grouped energy, climate and environment portfolios together
under the vice‐president for energy union. This was originally to be the former
Slovenian Prime Minister Alenka Bratušek. However, she withdrew because oflack of support among MEPs but actually as the sacrificial victim in the roughtrading over posts in which more weighty candidates survived. She was
replaced by a Slovakian, Maroš Šefcovic, who in his hurriedly convened
confirmation hearings and in a clear statement of political priorities, proposeda gas‐purchasing union as his leading policy. With a clear reference to Moscow,Šefcovic said EU countries must secure “much better treatment [and] muchbetter price” when negotiating long‐term gas contracts. “We are the biggest
energy customer in the world, [but] are we behaving like that?” Šefcovic asked
the MEPs.40
Juncker has merged four existing commissioner posts into two. Energy andclimate have been combined into one post, now held, as already mentioned, byMiguel Arias Cañete from Spain. Environment and fisheries have been merged
into one, to be held by Karmenu Vella from Malta. Cañete is a political heavy‐
weight close to Prime Minister Rajoy from the Partido Popular, which is one of
the largest traditional “portfolio” parties in the EPP.

THE HORRIFIED AND ANGRY REACTION OF THE ‘GREEN 10’
The first announcement of Juncker’s changes horrified environmental and‘climate action’ NGOs who correctly saw their powers to affect final EU policy
being considerably reduced. They objected both to the filter mechanism and to
the streamlining. Tony Long of the WWF Policy Office was reported as sayingthat “The biggest change is the structural blocks put on any new legislative
activity. Every avenue is blocked because it all has to go through a vice‐president and then a first vice‐president.” He was not wrong.

40

A. Walstad, “Šefcovic vows to ‘explore’ common gas purchasing,” 23 October 2014,
http://interfaxenergy.com/gasdaily/article/13995/sefcovic‐vows‐to‐explore‐common‐gas‐purchasing

35

IEEJ : April, 2015 All Rights Reserved

The World Wildlife Fund was a signatory along with other activist NGOs of anangry protest letter sent to Jean‐Claude Juncker on 11 September.41 The self‐styled “Green 10” complained that
The merging of the climate and energy portfolios and putting
this Commissioner under a Vice President for Energy Union
could imply that ‘climate action’ is considered subordinate toenergy market considerations.
Given their demonization of fossil fuels, they also objected to the choice ofMiguel Arias Cañete on the grounds that, “the choice of a Climate and Energy
Commissioner with well‐known links to the fossil fuel industry raises issues ofconflict of interest”. The former Spanish agriculture and environment minister
lists holdings in two oil companies Ducor SL and Petrologis Canarias SL, ofboth of which he had previously been president.
In sum, as activist NGOs often do, the “Green 10” smelt conspiracy. They
condemned root and branch all aspects of the Commission’s approach:
The structure of the new Commission, the mission letters, andthe choice of Commissioners all reveal a serious downgradingof environment and a roll back of EU commitments tosustainable development, resource efficiency, air quality,
biodiversity protection and ‘climate action’.
They ended their letter with an open threat to mobilise the European
Parliament against the Commission in the forthcoming ratification hearings.
MEPs also protested against the merger of energy and ‘‘climate action’’. One ofthese, an environment committee member, the German social‐democrat Jo
Leinen, said, “we will question him in the hearing about his commitment to a
low carbon economy as well as his personal and political integrity and we
expect clear answers. Parliament has refused various candidates in the past so
there is no guarantee that he will come out as a commissioner.”42 And so theydid. Cañete was given a rough time in his ratification hearing. Outside in thestreets, the Greens mobilised demonstrations with posters bearing sentiments
such as “no fossil fuels in my democracy” (sic). In the event, the Socialists and41

http://awsassets.panda.org/downloads/14_089_g10_open__letter_to_president_elect_juncker_
september_2014.pdf
42
A.Neslen, “New EU Energy and Climate Commissioner must drop oil shares,” The Guardian,
12 September 2014; http://www.theguardian.com/environment/2014/sep/12/new‐eu‐energy‐
and‐climate‐commissioner‐must‐drop‐oil‐shares

36

IEEJ : April, 2015 All Rights Reserved

the EPP (conservative) groupings threatened mutually assured destruction: todestroy each other’s main candidates – the French Muscovini and the Spanish
Cañete – if either were touched; so neither were. The unpopular Slovenian
light‐weight Alenka Bratušek was thrown overboard to register a symbolic
victory for the MEPs and the concerted protests against Cañete were all ignored.
In fact there seems little conspiracy about it. It was all rather straightforward.
Juncker’s Mission Letter to Miguel Arias Cañete listed his tasks. The energy
security and wider energy issues all precede any ‘climate action’ tasks. From
what is known about Cañete’s own interests and past careers, they would seemto match that ranking of priorities.43 Furthermore, as the ‘Green 10’ complained,
but as is quite logical if the priorities are what they clearly appear to be, hereports to the Vice President for Energy Union who in any case he outweighs interms of political clout.
In sum, the Juncker Commission seems to be shaped for a set of high priority
tasks, mainly determined by the major crises facing the EU in the last quarter of2014 – the collapse of the Eurozone, social foment in southern Europe, Russian
hostility, Islamist terrorism, gas‐supply threats and security, the oil price slump‐ of which ‘climate action’ is not one. The authoritative EurActiv web‐journal
judges that ‘‘climate action’’ is the biggest loser in the new Commission.44
This same assessment was made in the first draft of this report in September
2014. Then on 16 December 2014, The Wall St Journal obtained early sight of
documents which appear to confirm the analysis substantively and in detail.
First, the Juncker Commission intends to start to operate more closely as asupra‐national European government. Therefore it will not be bound tocontinue any of the policies of its predecessor, the Barosso Commission. A
spokesman for Mr Juncker is quoted as saying, “When the new commission
comes in, we’re not on autopilot.” The Vice President of the new Commission,Frans Timmermans of the Netherlands, has reportedly prepared a plan to scrap
80 of 415 pieces of unfinished legislation inherited. These include two showcase
environmental policies, which have both European Parliament and national
government support. One is a proposal to lower ambient air pollution levels;
the other, the so‐called ‘circular economy’ policy which raises requirements forre‐cycling of waste. A spokeswoman for Mr Juncker commented: “We agree43

http://ec.europa.eu/about/juncker‐commission/docs/arias‐Cañete_en.pdf
http://www.euractiv.com/sections/climate‐environment/climate‐biggest‐loser‐new‐commission‐308420

44

37

IEEJ : April, 2015 All Rights Reservedthat Europe needs to be ambitious, including on environment and social
standards, but it would be pointless if we were wasting our time and energy on
proposals that have no chance of being adopted and that will not deliver the
results that we want to see on the ground.”45
Environmentalist activists have expressed reflexive horror and repeated thenow self‐evident view that the Juncker Commission has relegatedenvironmental policies to second or third rank importance.

THE POSITION OF THREE GROUPS OF EUROPEAN COUNTRIES ON ‘CLIMATE ACTION’ AND
ENERGY POLICY FACING 2015

Whereas the changes in the regional and international context, including at theEU, have been both fast and unexpected for most policy‐makers, national
policies change at a slower tempo. They have this momentum because of sunkpolitical capital. Politicians and bureaucrats care more about not being made toappear wrong or foolish than almost anything else. So it is hard for politicians,
especially when running for re‐election, to admit to past mistakes. In anotherpart this is because of genuinely different national cultural and in consequence
economic priorities.
In Europe, German public opinion is the most consistently ‘green’ and probably
the most willing to bear excess costs in that cause. So there are somediscernable trends. There are also discernable tensions in particular countries,
such as Great Britain, which make it genuinely impossible to predict which way
they may ‘flip’ when the latent tension of the political spring is released by anelection result.
Therefore systematic and detailed predictions simply cannot be offered because
there are too many moving parts. The eighth oil price slump of more than 30%
in the last thirty years is the most recently added; for on top of the cascading
political uncertainties already documented in this report, the developments inworld energy markets, which have seen a 50% fall in the posted price for thebenchmark Brent Crude oil price in six months, has literally knocked thebottom out of the expectations for any market comparable performance forsubsidy‐free ‘renewables’ any time soon, as well as voiding investment plans

45

M Dalton, “European Commission set to scrap environmental proposals”, The Wall St Journal,
16 December 2014, http://www.wsj.com/articles/european‐commission‐set‐to‐scrap‐
environmental‐proposals‐1418565529

38

IEEJ : April, 2015 All Rights Reservedthat are not viable at $60bbl for tight or deep‐sea oil. As will be mentioned
below, it makes the economics of Great Britain’s proposed new nuclear plants‘insane’46 In passing, one should notice that the oil price drop has destroyed theeconomic case for an independent Scotland that was presented in 2014, which
the Scottish Nationalists predicated on an assumption of oil at well over $100
bbl. However, despite having lost the independence referendum by aconvincing margin (10%), that is no guarantee that the issue has been settled
even in the short term. As will also be mentioned below, the oil price drop has
led to a considerable and still emerging scandal centred on the DECC in the
United Kingdom.
The ‘Scarcity Peak Oil’ view which environmental activists favour and which
they convinced some governments, including the British government throughthe ideologically‐driven DECC, to believe too, looks now, in the face of actual
market data, to be as simple‐minded and wrong as it actually is.47 As theworld’s leading historian of energy comments, “Peak oil nightmares have notcome to govern the oil market, which has remained well supplied at affordable
prices.” Renewable energy policy has not been based on an historicallyinformed understanding of energy markets but on a simple conflation of thewish with the reality, which is always a leading sign of there being principally
an ideological drive to a policy. Professor Smil recommends chamomile tea as asoothing drink to help calm over‐excitable Scarcity Peak Oil believers.48
Therefore the most helpful thing that this concluding section can offer tocurious external observers of Europe in such volatile times is an over‐view ofsome of the underlying trends and some provisional indications of what seems
to be happening in three groups of European states, but principally in the core
enthusiast countries. These observations are offered with the proviso that thecontext as just described is so unlike events before 2014 that no firm predictions
can be made, particularly in countries like Great Britain which face unusually
uncertain election outcomes in 2015.

46

T. Bawden, “Era of cheap oil ‘will destroy green energy revolution,’ The Independent, 12
December 2014. http://www.independent.co.uk/environment/new‐era‐of‐cheap‐oil‐will‐
destroy‐green‐revolution‐9922217.html
47
Scarcity Peak is to be distinguished from ‘Rate Peak’ which is a more empirically based anduseful concept. See G.Prins et al, The Vital Spark: Innovating clean and affordable energy for all:
The Third Hartwell paper, LSE, July 2013, pp.35‐37
48
V.Smil, “Are low oil prices good or bad?” The American, 22 December 2014,
https://www.aei.org/publication/low‐gas‐prices‐good‐bad/39

IEEJ : April, 2015 All Rights Reserved

The position of two groups of countries in peripheral Europe – Scandinavia andeastern Europe – is in some ways more certain than the position in several ofthe more politically pivotal states. But developments there are simply less likely
to influence direction than was the case during the Barrosso Commission era.
Therefore in the interests of concision, the rest of the report will address mainly
the core nations whose political, cultural and industrial dynamics matter more
and, as mentioned, are in several ways less predictable for external observers
keen to assess the European scene.
Scandinavian influence over ‘climate action’ in Brussels is waning. Mrs
Hedegaard and her Directorate General are no more and Danish wind‐power iswhat it is domestically (around 30% of electricity consumption – a world
leading amount). Less remarked is that Denmark is self‐sufficient in oil. It is
not likely to be more of a presence than is already known in international
renewable energy markets. Vestas was a badly run and badly managed
company which compounded its position in a frothy sector to cause its decline
and take‐over in a fire sale by Chinese interests. Likewise, Finnish commitment
to nuclear and Sweden’s richness in hydro and bio‐mass are uncontroversial
and stable. Norway continues to manage the proceeds of its oil extraction fromrobust and relatively low cost fields more responsibly than any other state.
A second group of European countries comprises those within the easternformer soviet sphere of influence. All have a legacy of infrastructure priorities
from that era, expressed in heavy use of coal and long experience of and general
acceptance of nuclear power. The Baltic states have disengaged from theRussian sphere in many areas of life over the last twenty years but in gas(GAZPROM) and electricity continue to be linked into Russian grids. Russia’s
TSO continues to maintain the synchronicity of the Estonian grid. The Estonia‐
Latvia connector is part of a grid system with Russia, Belarus and Lithuania.
However, Estlink 1 connected Estonia to Finland in 2006 and Estlink 2 which
was constructed between 2011 and 2014 and is now also operational give amaterial symbol of the country’s western inclination.49 However that must beread in the light of Estonian plans to evacuate its national data‐bases to servers
in the west faced with the real possibility of re‐occupation by Putin’s Russia as
the war across eastern Europe deepens and intensifies.

49

http://balticbusinessnews.com/article/2014/6/25/estonia‐must‐disconnect‐from‐russian‐energy‐networks‐as‐soon‐as‐possible; http://elering.ee/the‐electricity‐system/

40

IEEJ : April, 2015 All Rights Reserved

One aspiration of the EU energy security policy developed during the summerof 2014 is to find further ways to sever Baltic connectivity into and control by
the Russia. The threat of energy blackmail is one of Putin’s most credible
weapons and the eastern rim countries noticed very firmly how the Russian
support for the eastern Ukrainian separatists had the contingent effect ofdepriving Ukraine of its most promising prospective shale gas plays.
The geo‐political priority arising from the new Cold War trumps otherconcerns in this region. But that has been consistently so since the end ofcommunism. In 1990‐91 the author served as energy adviser to the federal
Czechoslovak government during the first flush of excitement after the ‘velvet
revolution’ of November 1989. Working with the late Josef Vavroušek, theMinister of the Environment, a forest resource survey showed large forest waste
biomass potential. Then a detailed pilot study plan were prepared to test thepotentiality for bio‐gas fired gas turbine CHP as an alternative to the lignite
coal‐fired electricity and domestic space‐heating, that was urgently phased out(as also in East Germany) as a public health priority, or new nuclear capacity:
the new government had halted construction of unit 2 at Temelin in 1990. With
co‐operation from Cambridge and Princeton Universities, Rolls‐Royce andCzechoslovak companies and agencies, a pilot BIG‐ISTIG plant based on theRolls‐Royce RB211 engine was in prospect for a site near Cešky Krumlov50.
However the political priority was to boost Slovakia and in particular to invest
at the troubled Bohunice site51; and in any case the initiative was lost in the‘Velvet Divorce’ of the two parts of the country in 1993.
Following the divorce, both the Temelin plants were completed, with
Westinghouse upgrading the Instrumentation and Control – the first time that
this was done to a Soviet reactor design. Today the Czech republic has two
major nuclear sites at Temelin and Dukovany, running a mature technology
mix of mid‐life Russian VVER reactors with western I&C which provide a thirdof its electricity. The country is in the German grid and supplies that country
through it. However, in 2012 CEZ (the mainly State‐owned operating company)
had to reduce power output from its base‐load nuclear stations to cope withgrid surges from the increasing amounts of uncontrollable renewable energythat the German energiewende was surging onto the grid. Modern Czech
50

Biogas Integrated Gasifier with Steam Injected Gas Turbine co‐generation. See
https://www.princeton.edu/pei/energy/publications/texts/Larson_91_Biomass_Gasifier_Cogene
ration.pdf
51
http://www.world‐nuclear.org/info/Country‐Profiles/Countries‐O‐S/Slovakia

41

IEEJ : April, 2015 All Rights Reserved

industry is heavily energy intensive and the Republic was Poland’s principal
diplomatic ally in forcing the compromise which made the EU 2030 climate
action plan toothless.
The eastern rim states’ strategic energy priorities are such that even the EU
encountered problems in trying promote de‐nuclearisation. As a condition ofentry to the EU it imposed on Slovakia the closure of two of the early Soviet
reactors at Bohunice because of alleged safety fears and despite extensive
upgrading of safety systems and instrumentation: Bohunice is near the Austrianborder. Even here the closure deadlines slipped and there was great bitterness
at such blackmail which made Slovakia an energy importer. New nuclear plants
are in prospect to restore the country’s energy independence.
But in the eastern rim region the key country of influence is Poland. Here thedomestic picture is rather stable. Poles have consistently expressed the highest
levels of support in Europe for shale gas exploration. The economy is heavily
coal‐fired (90%) relying on domestic sources from its huge mining industry;has had severance of its links to the soviet‐era regional infrastructure as aconsistent priority for twenty years; has successfully adopted free market
economics and has successfully modernised its economy and has, of all theeastern European entrants to the EU, rapidly acquired the greatest influence inBrussels. This trajectory was confirmed with the appointment of the centre‐
right Polish Prime Minister Donald Tusk to be successor to Herman van
Rompuy as President of the European Council, which makes him the mostsenior easterner to date in the Brussels hierarchy. Reportedly he was in two
minds about moving from the national to the EU stage, but was persuaded by
his wife Malgorzata to accept for the “prestige, better money and less problems
at work.”52
The question is whether Mr Tusk will become ‘house trained’ to Brussels
priorities and, even if he does, whether he will be able to influence the views of
his successors at home. The evidence of Polish diplomacy during the periodleading into the crucial EU Council meeting of October, described above,
suggests not.
Poland’s foreign minister Rafal Trzaskowski played tough from the start.
Backed by the Czech Republic, but also Hungary and Romania, he threatened52

M. Day, “Donald Tusk, the new head of Europe” The Daily Telegraph, 31 August 2014;
http://www.telegraph.co.uk/news/worldnews/europe/eu/11066174/Donald‐Tusk‐the‐new‐head‐of‐Europe.html

42

IEEJ : April, 2015 All Rights Reserved

to block the 2030 Climate Action plan unless the EU produced more real cash
and not just promises of waiver and transitional exemptions. In the week
before the summit, Deputy Prime Minister and Economy Minister Janusz
Piechociński stepped up the pressure. Speaking on Polish Radio on 17 October,he said that “for the Polish economy minister and the majority of EU economy
ministers the 40‐percent option, which destroys half of Europe’s industry, is
unacceptable.”53 The principal opposition Law & Justice party announced that
if the Polish Prime Minister vetoed the 2030 plan, he would have its support.
Mrs Merkel instantly pulled back from previously strong support of the Anglo‐
French lead and in the event, the compromise of allowing effective national
veto saved face and permitted a meaningless deal to be brandished before thepublic and international partners, suggesting that the process was continuing.
Whether it continues will eventually depend on sovereign decision (of course)
and therefore the position of the core enthusiasts who promoted the original2030 draft, Germany, France and Britain must now be examined.

THE ‘CORE ENTHUSIASTS’ – PAST OR PRESENT (GERMANY, SPAIN, FRANCE, BRITAIN)

Germany is the pivotal state for European ‘climate action’ and renewableenergy issues because it is also the pivotal state in EU governance, in the Euro
crisis, in the Eastern policy versus Putin as well as being the leading
experimenter in the push for a ‘green’ energy transition. Therefore theenergiewende has been discussed from several directions extensively already inthis report. In summary, its internal incoherence is steadily poisoning theGerman economy. The mittelstand companies are the back‐bone of German
industrial strength and are being crucified in the international market. A
typical medium‐sized German industrial company now pays 9.14 euro cents perkilowatt hour compared with 4.82 cents/kWh in Texas, according to researchcarried out by Ecofys, a consultancy, and the Fraunhofer Institute for Systems
and Innovation Research. The study, commissioned by the German
government, is based on prices paid over the past two years.54 Claims byGerman green energy promoters that there is or will be convergence with US
energy prices are not convincing.
53

cited in the Warsaw Business Journal at at http://wbj.pl/poland‐will‐veto‐40‐co2‐reduction‐
piechocinski/
54
J. Vasagar, “German businesses grapple with green energy costs,” The Financial Times, 7 Sept
2014.

43

IEEJ : April, 2015 All Rights Reserved

Actions speak louder than words. So it is telling that several large energy user
industries, like the chemicals giant BASF, have both ‘off‐shored’ production to
the USA and/or investing in stand‐by power‐plants. Energy intensive users
have also been granted temporary waivers from green charges which helps inthe short term but does not create a long‐term climate of investor confidence.
Heribert Hauck, general manager for energy at Trimet Aluminum, one ofGermany’s biggest electricity consumers, told The Financial Times that “for us,
and for the whole economy, the Energiewende is an enormous challenge, agigantic experiment that is not yet at an end.” The need to build new coal‐fired
plant, mentioned earlier, is proof of this.
However Mrs Merkel is surely correct when she announced earlier this yearthat if any country can accomplish such a massive transformation, thenGermany can. Certainly it can draw on its long‐established green ethos, much
linked to love of forests and entwined with the German search for its sense ofheimat (home). It is evident in German culture from the nineteenth century
German Romantic poets, through Wagner and the early twentieth‐century
wandervogel movements, prominently through the Nazi era which celebrated
all the above with gusto (and which is nowadays a suppressed memory) to themodern‐day Greens. 55
The modern German environmental movement first showed itself in the“Atomkraft nein danke!” smiley sun anti‐nuclear power protest which was also
one of the foundations of the big activist NGOs Greenpeace and Friends of the
Earth in the 1970s. Die Grünen have become the leading ‘green’ politicalmovement in Europe. The transition from a dreamy counter‐cultural origin toeffective and occasionally ruthless machine politics was accomplished throughfierce debates between ‘fundis’ (fundamentalists) and ‘realos’ (realists) whichthe ‘realos’ won. Joschka Fischer was a leader of the Greens for twenty years
and his political career mapped that journey. From 1998‐2005 he wasGermany’s Foreign Minister and Vice‐Chancellor in Gerhard Schroeder’sgovernment in which he learned and practiced the realities of power politics.
Latterly he has become a prominent and remorseless advocate of full, organic
European political union.

55

The most profound and thoughtful recent review of environmentalism, which includes viewson the links between environmentalism and fascism is R. Scruton, Green Philosophy: How tothink seriously about the planet, Atlantic Books, 2012. On Germany see especially pp 235‐8,

44

IEEJ : April, 2015 All Rights Reserved

German opposition to nuclear power is deep and visceral: its basis is emotionalrather than rational and Merkel, with her acute political antennae, responded
to it in her instant announcement of the “bogus” nuclear switch‐off after the
Fukushima accident. It was bogus in that Germany continues to importnuclear generated electricity from France and from eastern Europe. Nor is there
any rational reason to see transferability of risk from the precise reasons for the
Fukushima accident which occurred in an old, poorly laid‐out plant on the
coast in a high‐ risk earthquake area to modern nuclear plants in the middle of
the European land mass. However observers see no sign that the German de‐
nuclearisation decision will be easily reversed.
Nor is this the only deep root of Germany’s environmentalism. Germany has astrong and sometimes tragic history of kadavergehorsam – ‘body loyalty’
expressed as unthinking social discipline. Die Grünen have benefitted from
that; and the evangelical ferocity of promotion of the energiewende by theidealists who support it will mean that therefore there will have to beconsiderable, visible and painful damage before the policy is abandoned. Also,
there appears to be a third driver propelling this policy. German spokesmen
follow the Chancellor’s lead. A sense of atonement can be sensed behind thepromotion of the energiewende. The case made is that by heroic altruism andcost to themselves, Germans will give a positive lead as another facet of
atonement for the twentieth century disasters of world war into which they had
previously led the wider world.
So there is little doubt that the experiment will continue. Whether it succeeds(which this report thinks is unlikely both on present evidence, and since it is in
defiance of all historical precedent) or fails, we may be grateful to the Germans
for conducting it for the lessons that it teaches. The danger associated with theexperiment, however, is that because of Germany’s nodal position in the othercrises in Europe today, in failing it may contribute unwelcome further variablesof instability both to the euro crisis and to the renewed Cold War with Russia
within 2015’s critically unbalanced and fragile European scene.
Therefore, for non‐European observers of the continent, Germany is the pivot
state to watch. Britain, France and Spain are also core enthusiasts ‐ for quite
different reasons in each case. They influence different vital aspects of theEuropean energy scene: Britain through its policy and energy‐planning
experiment; France because of its unique nuclear power sector and associatedexpertise; Spain because of the scale of the boom and bust in its subsidy‐

45

IEEJ : April, 2015 All Rights Reserved

created domestic renewable market. But no one of these alone can havedecisive impact as Germany and the German experience can. Hence the extent
of comments on the energiewende given here.
The Spanish case is the most straightforward in that the motivation for theboom in its renewables industries, and their bust, already described above inthis report, was directly driven by the politics of subsidy. The collapse
engendered by Prime Minister Rajoy’s January 2012 volte face was deemed to bea lesser evil than failure to try to deal with the ravages of the Eurozone. Major
Spanish companies like Gamesa have responded by vigorously seeking todevelop overseas business to compensate for the loss of home market. That
strategy is now, like that of other ‘green energy’ exporters, facing theunpredicted but predictable – yet to Scarcity Peak Oil believers, unthinkable ‐eventuality of oil at $50‐$60 bbl. The Peak Oil narrative is built into theirbusiness case assumptions. The challenge will be greatest for wind power
exporters because there is already market‐equivalent competitiveness for off‐
grid solar in the sun‐belt and in undeveloped economies. But these are
essentially still ‘niche’ markets. Hopes for grid‐scaleable solar in the American
west have yet to be proven in a domestic market flooded with cheap
dispatchable power.
Yet the Spanish case illuminates also another facet of the general European
scene that touches directly the future prospects of ‘green’ politics and policies.
The Spanish political class, of which the new EU Energy and Climate Action
Commissioner Miguel Arias Cañete is a prominent member, sits on top of apolitical volcano. Spain today suffers from youth unemployment near 50%, theconsequent loss by emigration – for example to Latin America ‐ of many of its
brightest young people, a collapse of public confidence in established politicalparties, soured by major corruption scandals surrounding the ruling Partido
Popular, a deeply split population with many younger and better educatedpeople backing the anti‐austerity Podemos ‘anti‐party’. The response of the‘portfolio’ parties of Right and Left (Partido Popular and the Socialists) is tobegin to consider a common anti‐populist front which would formalise theinter‐generational as well as cultural division even more clearly.
Such fragmentation is especially evident in the southern European countries(Portugal, Spain, Italy, Greece) that are suffering most grievously from social
mayhem created by the Euro crisis; but it is in fact an aspect of a general trend
in European politics that has been most fully documented by Peter Mair in

46

IEEJ : April, 2015 All Rights Reserved

Ruling the Void, his path‐breaking study of contemporary European party
politics. Since his analysis applies to most other European states – even
Scandinavian where there has previously been a much stronger pattern oflegitimated and engaged politics – and since the type of politics represented by‘climate action’ advocacy is also shrewdly analysed in his book, it may be
helpful to summarise Mair’s findings here.56
Mair’s data documents across all European democracies a trend for voters since1990 to cease to vote, or if they do vote, to be increasingly likely to switch
preferences from one election to the next. This, he argues, is because there is a
growing acceptance of depoliticised, technocratic forms of decision‐making (ofwhich the UNFCCC/IPCC climate politics and stealth issue advocacy processes
are a leading illustration). The logical consequence for political process is that
there is an increased tendency for citizens to seek redress of grievances via
judicial or quasi‐judicial methods, or by media and especially modern ‘social
media’ campaigns, rather than by old‐fashioned appeal at the ballot box.
Insofar as voting is popular, the trend is of a rising demand for referenda, short‐circuiting the untrusted political class. Ironically transfer of power to citizens
directly, systematically downgrades both the status and influence of any truly
independent expert input via political debate and increases the likelihood ofstealth issue advocacy because of its polemical power. The ‘climate action’ issue
is once again a prime example of this.
Mair summarises this trend to mean that the modern state is viewed more as
regulatory and less as participatory. This is reflected in his fascinating findingthat across all the established European democracies political party
membership has declined on average by 50%, with range from minus 66 tominus 27, since 1980.57 In Britain, for example, membership of The National
Trust (which cares for historic buildings and landscapes) far exceeds that of any
political party, or indeed of several combined. In a longer timescale, in 2014
Europe’s oldest established and most successful election‐winning party, theBritish Conservative party, has 2% of the membership that it had in 1950.
Mair also makes the same point with which this report opened, namely of therole played in the hollowing out of European democracy by the essential
character of the EU which has caused it to construct “…a protected sphere inwhich policy‐making can evade the constraints imposed by representative
56
57

P.Mair, Ruling the Void: the Hollowing of Western Democracy, Verso, 2013
Mair, Table 4, ‘Party membership change in established democracies 1980‐2009’ p.41

47

IEEJ : April, 2015 All Rights Reserved

government.”58 He too believes that this has aggravated the general trend,
because the EU elite’s contempt for the electorate is reciprocated. Therefore it
is not surprising to see on the one hand a countervailing response in thecurrent rapid grown of ‘anti‐party’ politics in most EU countries, especially‘core’ countries, and on the other, of nationalist parties in Scotland, Catalonia,
Northern Italy and elsewhere. During 2015 a slew of elections will occur. So far
announced are in Britain, Spain, Poland, Denmark, Finland, Portugal andEstonia. The Swedish election, also driven by the voiding of the old portfolio
parties, has just been cancelled because those parties of Left and Right havecombined to see off the threat from the populists to pass the budget. The 2015
elections will further explore the strength of Mair’s hypothesis.
France has, as always, followed a unique path in national energy policy. It has
been made possible technically by its highly centralised political and economic
decision‐making and by the close‐knit nature of its elite of ‘enarques’(graduates of the Ecole Nationale d’ Administration) and culturally by thestrong sense of French exceptionalism which, in the Gaullism of the Fifth
Republic, combined with vivid but submerged memories of the humiliations ofserial defeat (1871, 1914, 1940, 1956) and collaboration with German occupation
hidden by the myth of heroic resistance.59
Both Great Britain and France had also experienced profound political
reactions to the Eisenhower Administration’s irresistible exercise of its powerover them in forcing the termination of the Anglo‐French military operations
to take control of the Suez Canal in 1956 after its nationalisation had beenproclaimed by President Nasser of Egypt. In the French case this humiliation
reinforced General de Gaulle’s political will to gain and retain the controlling
direction of the emergent European project (“the skilful French rider shall steer
the sturdy German horse”) which in response to the transatlantic crisis took an
accelerated leap forward in June 1957 with signature of the Treaty of Rome. The
building of a nuclear deterrent force de frappe independent of the USA and an
urgent civil nuclear programme (based ironically on American reactors andinitially on American fuel) to make France’s energy supplies safe from any
future interruption of Middle Eastern and especially trans‐Suez oil benefitted
from similar impetus.

58

Mair, Ruling the Void, p.99.
This unspoken pact of silence was only broken in 1969 with the screening of Marcel Ophuls
documentary of spoken witness to life in Vichy France, le Chagrin et la Pitié.

59

48

IEEJ : April, 2015 All Rights Reserved

From the civil nuclear decision sprang one of the swiftest successful nationalenergy transitions of modern times (the other being Japanese). Electricité deFrance, the national energy company whose majority share‐holder is thegovernment, now manages a fleet of 59 power reactors that have nuclearized
75% of French electricity. They were built in two waves, the first – the post‐
Suez wave ‐ started in 1962 and another, larger wave began to be built under
the Messmer plan which was a response to the 1973 oil price shocks.
Problems arose in due course. There was the failure of an intended upgraderoute via the Super Phénix fast‐breeder programme and – a continuing issue –with block obsolescence of cohorts of reactors. France has experienced fracture
issues, clouded in secrecy and intrigue, across the fleets of PWRs. It operates
the non communist world’s most standardised fleet of power reactors which
has obvious advantages but also obvious dangers. The future is also less clear
than it once was. Whereas President Sarkozy authorised life‐extension beyond
40 years for some reactors, before his presidency descended into chaos in 2014,
President Hollande, responding to ‘green’ tendencies in his Socialist coalition,
intimated that he might start a French nuclear phase‐out. There has always
been a French environmentalist movement but never on the scale or power of
its German counterpart, although now growing in support particularly in therural south west in opposition to hydro programmes.
The French ‘campaign’ approach to nuclear construction required the rapid
development of national nuclear expertise, which was accomplished throughthe Grandes Ecoles, and of national nuclear construction companies.
Framatome and Cogema were merged into one national champion, Areva, in
2oo1 which is 78% government owned. However, via Siemens, the German
government owns a 34% share of the Areva subsidiary that is developing thethird generation EPR (European Pressurised Reactor) which is late on scheduleand cost overrun. (There are both Franco‐Japanese (Atmea) and Franco‐
Chinese alternative designs as possible alternatives should the EPR stall.) But
this Franco‐German relationship and indeed the future of the research
trajectory are now in doubt, not only from post Fukushima political fall‐out,
but also from the grim financial position of Areva and its fractious relationshipwith EDF. In November 2014 it issued its third profit warning in four months.
This has had knock‐on consequences outside France, notably in Finland where
Areva is in dispute over the construction of the Olkiluoto EPR (which
contributed to its difficulties) and in Great Britain where it is contracted for49

IEEJ : April, 2015 All Rights Reserved

10% of the project value to supply EPR technology for the twin reactor Hinkley
Point C for which EDF is the lead contractor (although currently reported to betrying to sell on 40% of its stake to two Chinese enterprises). 60
The astonishing nature of the Hinkley Point C contract is a good bridge to thereview of the strange present state and prospects for ‘climate action’ andrenewable energy in Britain. But before we cross it, the conclusion to be noted
for France is to reaffirm its world leading position as a nuclear electricity
exporter as well as producer and the power of its industrial position both inutility management via EDF and in design and construction. Indeed, some inBrussels trying to build an ‘Energy Union’ argue that France should sacrificenational self‐sufficiency and end load‐following operation of its PWR fleet inorder to anchor the ‘EU energy union’ by become the EU base‐load producer,
buying its peaking power from others.
This plan would help to rescue Germany from its self‐harming experiment with
non‐dispatchable power and could back‐stop countries faced with energy
blackmail threats from the east. But it would require immense reciprocal
political trust which the evidence of the currency union shows is simply notpresent or in prospect.
Furthermore, the profound political crisis affecting France during the final
stages of Francois Hollande’s spectacularly chaotic and disruptive presidency
may affect foreign partners’ assessment of country risk. The ‘energy union’,rather like the stricken currency union, is to be seen in normal EU manner
more as a means to the undeclared end of irrevocable federal political union
than solely in its own terms and therefore should be treated with the usual due
caution that should be applied to any EU policy. In similar vein, the ambitionsof the very lame duck Hollande government in relation to the Paris UNFCCC
conference are more likely to be about attracting domestic constituencies thancaring much about the substance of the Conference. France’s high nuclear
power component put it on the side of the carbon reduction angels; so theposition of advocacy is relatively cost‐free.

60

The World Nuclear Association publishes a brief but comprehensive and authoritative
history of the French nuclear programmes at http://www.world‐nuclear.org/info/Country‐
Profiles/Countries‐A‐F/France/. On Areva and Hinkley Point see E.Gosden and A Armstrong,“Hinkley Point nuclear plant ‘threatened by Areva financial crisis’” The Daily Telegraph, 19
November 2014, http://www.telegraph.co.uk/finance/newsbysector/energy/11242094/Hinkley‐
Point‐nuclear‐plant‐threatened‐by‐Areva‐financial‐crisis.html

50

IEEJ : April, 2015 All Rights Reserved

During the 2000s, British politics was in thrall to a political version of load‐
following power generation. Tony Blair had observed and learned the power of‘triangulation’ from the Bill Clinton presidency and perfected the skills of being
all things to all men as a way of building coalitions of special interests to makehis portfolio Labour party electable and then to keep in power. He gutted it ofsocialist ideology – even changed its name to ‘New Labour’ ‐ and made a virtueof riding some of the trends later analysed by Peter Mair in order to govern the
deepening void. The appeal of environmental catastrophism, which alsoreached and passed its apogee in the Blair years, was obvious. If thecatastrophist case was accepted, it gave a mandate for extended stateintervention into all areas of life, including much personal and private
behaviour. This pleased the green activists who gained extensive power ingovernment and it pleased doctrinaire socialists like Blair’s great rival andeventual successor, Gordon Brown and his junior acolytes like Edward Miliband
Socialist parties have far less compunction about messing with establishedconstitutional and governance arrangements than conservatives and theBlair/Brown governments surpassed all Labour predecessors in their busyness.
Brown was, like Jean Monnet and the proponents of a federal European state,
Gramscian in his understanding that in the absence of popular support,
irreversible social change is best achieved by a ‘long march through theinstitutions’ in western democracies. Accordingly Brown created thestructurally incoherent ‘Department of Energy and Climate Change’ as a vehicle
for his protégé Edward Miliband, another doctrinaire socialist and current
leader of the British Labour Party. Miliband in turn was responsible throughthe DECC for shaping the legislative and bureaucratic context for his successors,
including passing the 2008 Climate Change Act. History already shows that
Brown was simultaneously one of the most damaging and most successful
Prime Ministers of recent times: damaging because he ran the economy into awall and created gigantic debt; successful because he embedded so many laws
and institutions that he still controls the terms of British politics – and theactions of his successors ‐ from beyond the political grave. His only
conventional success was to prevent Britain entering the Euro, even if his
motive was primarily to spite his arch‐rival Tony Blair.
David Cameron, a former public relations man, supported in particular by his
close adviser Oliver Letwin (who expresses personal zeal about the green
agenda), wholly imbibed the Blair doctrine and was once proud to identify

51

IEEJ : April, 2015 All Rights Reserved

himself as ‘the heir to Blair’. Like Blair, he tried to construct a new identity forhis party too and grasped ‘greenery’ as a way of trying to attract the votes of thesame sort of people who had voted for Blair. Like Blair, he made a point ofscorning his core supporters as a sign of welcome to newcomers. He evenchanged the symbol of his party to a squiggly green tree. Therefore in
opposition he neither contested the terms of climate catastrophism at its
apogee but rather embraced them nor criticised any of its structures, like the
DECC, nor resisted the Climate Change Act which was therefore passed withbi‐partisan votes, even though many Conservative MPs now state that they
never believed in it. Given that he failed to win an outright mandate he would
have been prevented from dismantling any of this edifice by the junior coalition
partners even it he had wished to do so.
The Liberal Democrats were given the Energy and Climate Change brief in the2010 Coalition as their most extensive Cabinet portfolio and they pushed it withfervour. Their first minister, Christopher Huhne, was succeeded by the lesscharismatic Ed Davey when, in a celebrated trial, Huhne and his former wife
were convicted of perverting the course of justice and imprisoned.
Time has revealed that Cameron’s environmentalism was mainly opportunistic
because, as it became clear to him that rather than transform his party, he hadin fact lost core support to the ‘anti party’ United Kingdom Independence Party
and was not winning the support of the ex‐Blairites, he is reported to haveordered his officials early in 2014 to ‘get rid of the green crap.’ He became afervent but frustrated advocate of fracking, unrealistically hoping for a British
economic boost such as the US economy is receiving from shale.61 Despite theclear approval for well regulated and well engineered fracking given in Sir
Robert Mair’s report of June 2012,62 a combination of environmental NGOs,
media allies and Liberal Democrats mounted a concerted and effective
campaign to discredit fracking in Britain, and very little progress has so far
been made to exploit rich proven reserves, especially in the north west of
England.

61

Unrealistic because the special conditions that permitted the shale boom in the USA (notably
abundant skilled drilling capacity and congenial mineral rights extraction legislation) are notpresent in Britain.
62
Sir Robert Mair, “Shale Gas extraction in the UK,” Royal Society/ Royal Academy ofEngineering, June 2012. https://royalsociety.org/~/media/policy/projects/shale‐gas‐extraction/2012‐06‐28‐shale‐gas.pdf

52

IEEJ : April, 2015 All Rights Reserved

The majority of Cameron’s MPs consistently opposed the Brown government’s
Gramscian raft of legislation and institutions on ‘climate action’ which it had
inherited. Their leading voice was the Minister of the Environment Owen
Paterson MP who nonetheless Cameron sacked in the summer of 2014 precisely
because he was so disliked by the environmentalist cabal. Following his sacking,on 15 October Paterson became the first major British politician to call for the
repeal of the 2008 Climate Change Act unless there was a general agreement byother nations to act likewise. Taking a similar position to that of the AustralianPrime Minister Tony Abbott, like former EU Energy Commissioner Oettinger,
quoted earlier, Paterson argued that unilateral actions like this were otherwise
self‐harming and pointless.63 Paterson’ speech also rehearsed the now well‐known objections to rent‐seeking wind‐farm developments, to the incoherence
which the combination of ad hoc stimuli by FIT subsidy, for example, andfailure to take a comprehensive approach to energy policy together produce,
increasing the risk that ‘the lights will go out’. As earlier detailed, the UK faces
tight margins and has responded, rather like Germany, by adopting contorted
postures such as maintaining coal‐fired plant regardless of emissions issues andat high additional costs.
The absence of any realistic energy planning in Britain for fifteen years, during
the hey‐day of ‘greenery’, when combined with accelerated decommissioning ofmajor base‐load plants under the EU Large Combustion Plant Directive (6.1 Gwof capacity scheduled to close by 201564) opens a gap for new build requirement.
Logically this would be supplied by the cleanest, cheapest dispatchable power
which is gas‐turbine and perhaps some nuclear plant. But in September 2013,
the same Ed Miliband who had occupied DECC under the Brown government
had announced at the Labour Party conference that he would freeze energy
prices to consumers for 20 months if elected in May 2015. This wiped over athird off the value of energy shares overnight and, as industry sources predicted
at the time, has crushed any remaining incentive to build new gas‐turbine
plants whose profitability was already under pressure both from the Carbon
Floor Price and from the structural incentive to use gas‐fired stations
inefficiently as back‐up and peaking power to complement wind, which, when63

http://blogs.spectator.co.uk/coffeehouse/2014/10/owen‐patersons‐speech‐on‐abandoning‐the‐2050‐climate‐change‐targets‐full‐text/64
http://www.carbonbrief.org/blog/2013/08/the‐uk%E2%80%99s‐power‐plant‐graveyards‐
what,‐where,‐and‐why/53

IEEJ : April, 2015 All Rights Reserved

blowing, is given priority for political reasons, rather than to run gas‐fired
plants at maximum efficiency and all the time.
Could new nuclear capacity fill the gap? The manner in which the EDF led
consortium was awarded the Hinkley Point C contract announced in October
2013 was astonishing. The consortium was guaranteed a ‘strike price’ for theelectricity to be generated of £92.50 per MWh in 2012 prices, to be cost adjusted
for 35 years, the difference of course coming from consumers and taxpayers.
While this was a lower strike price than that which the Government was
prepared to subsidise for some renewables, it contrasted with the UK market
price of £48/MWh at date of contract; and of course that price preceded themost recent fall in world oil and gas prices. One of the country’s leading energy
economists, Peter Atherton of Liberum Capital, commented that the deal was‘insane’. His analysis deserves quotation in full because it spells out theconsequences of believing the Scarcity Peak Oil fallacy when linked to stealthissue advocacy:
Once again, the UK Government is taking a massive bet that fossil
fuel prices will be extremely high in the future. If that bet proves tobe wrong then this contract will look economically insane when
HPC [Hinkley Point C] commissions. We are frankly staggered that
the UK Government thinks it is appropriate to take such a bet andunder‐write the economics of any power station that costs £5m per
MW and takes 9 years to build….
As far as we can see this makes Hinkley Point the most expensive
power station in the world (excluding hydro schemes) on a per MW
basis and also the plant with the longest construction period. By
way of contrast, for the cost of £16 billion for the 3,200MW to bebuilt the UK could build 27,000MW of new CCGT gas fired power
stations solving the ‘energy crunch’ for a generation.
Based on the disclosure so far this looks likely to be an outstanding
deal for EDF and its partners. On a leveraged basis we expect EDF
to earn a Return on Equity (ROE) well in excess of 20% and possiblyas high as 35%.

54

IEEJ : April, 2015 All Rights Reserved

Having considered the known terms of the deal, we areflabbergasted that the UK Government has committed future
generations of consumers to the costs that will flow from this deal.65
The further woes of the contract, arising from French difficulties, have alreadybeen mentioned. Atherton’s warning about the riskiness of the ‘Peak Oil’
gamble has become even more prescient than when he made it; and mattershave become worse for the Government which has been caught out in an
attempt to suppress inconvenient data which documents unsurprisingconsequences of basing policy on this fallacy.
In early November, DECC published the 2014 issue of its annual EstimatedImpacts of Energy and Climate Change Policies on Energy Prices and Bills. The
Minister Ed Davey’s consistent position had been to insist (in defiance of ‐ ormore likely ignorance of – Jevons’ Paradox and of evidence) that energy
efficiency gains would reduce consumption and therefore overall prices for
consumers. The report claimed that consumers would save £90 per year
because of DECC’s climate change policies.
Examining the report, the Renewable Energy Foundation noticed that the priceimpact tables which might substantiate this claim, had been removed. (It has
subsequently been reliably established that this was not, in fact, a decision
made in DECC but was one imposed on it by a more senior Minister close to
the Prime Minister). This seemed to REF to be scandalous and accordingly a
Freedom of Information request was made, and Parliamentary Questions (PQs)
were asked in the House of Lords by Lord Ridley, a Peer who takes a deep
interest in energy matters.
DECC refused to supply the information in response to the PQs – itself rather
scandalous; but on 11 December after delay and in all probability legal advice, it
released the missing tables which have now been published by REF.66 Theseshow that DECC calculations in the low fossil fuel price scenario, which now
seems to be the most likely, indicate a 40% rise in domestic electricity prices by2020 rising to 60% by 2030 to pay for the various green energy subsidies,including the Hinkley Point extravagance, compared to prices without DECC
policies.67 The situation for industry is even more severe. Medium sized65

http://www.itv.com/news/2013‐10‐30/ouch‐energy‐analyst‐is‐staggered‐by‐uks‐nuclear‐deal/
http://www.ref.org.uk/ref‐blog/325‐decc‐publishes‐energy‐price‐impacts
67
R. Mendick, “ Green policies to add 40% to the cost of household electricity bills,” The
Sunday Telegraph, 14 December 2014;
66

55

IEEJ : April, 2015 All Rights Reserved

companies with obligations under the Carbon Reduction Commitment would
see a 70% increase by 2020 over prices without policies, rising to an incredible
114% by 2030. All these price costs would be passed on to consumers, of course.
These are the current Departmental estimates on impacts. How likely are they
to come about? The answer to that touches both the larger question of thecontinuing viability of the EU‐wide drivers of such rises and the British
domestic questions posed by Owen Paterson, such as the continuation in forceof the Climate Change Act targets. That in turn touches upon what may happen
in the forthcoming British election. Radically different outcomes are perfectly
possible.
If the Conservatives win a clear mandate, then continued British membershipof the EU would be in doubt and the possibility of a wholesale dumping of
national ‘climate change’ legislation and actions, rather as the Juncker
Commission is doing, is possible. But if the ‘anti‐party’ UKIP manages to split
the natural conservative majority of the electorate enough to deprive theConservatives of outright victory, then Ed Miliband could walk through the
middle leading an enfeebled Labour party. He would then depend on coalition
partners who, at year’s end, look most likely to be the Scottish Nationalists who
seem on track to annihilate Labour in its Scottish heartlands. If this happens it
would repeat the scenario of 1910 when an enfeebled Liberal administration wasforced to dance to the tune of the Irish nationalists.
This scenario has very interesting climate action and energy implications
because Scotland is disproportionately important in the rent‐seeking renewableenergy construction boom, especially of wind‐farms. At present, Scotland
generates at peak far more power than its requires; but the expensive connector
grid to carry this power to England has not been built. It is a similar story to thewhat has happened in Germany where effort in the energiewende has also been
invested in the visible and politically attractive shop front – the wind turbinesand solar farms – and not in the back‐room ‐ the collector loops, offshore
connectors, transformers and power lines. (In the German case, TenneT the
Dutch TSO and prime contractor for the offshore connectors and for theGerman north/south spine transmission lines, encountered both technical andfinancial delays and so compounded the surge problem. The spine lines are stillin planning.) What has not yet been appreciated by the press and public is that
http://www.telegraph.co.uk/news/earth/energy/11292367/Green‐policies‐to‐add‐up‐to‐40pc‐to‐cost‐of‐household‐electricity.html

56

IEEJ : April, 2015 All Rights Reservedbuilding new interconnectors to reduce constraint payments is actually themore expensive option. The TenneT published reports reveal the scale of this in
the German offshore wind case.68 Estimates that the system management costsof the UK wind programme would total about £5 billion a year in 2020 are
looking still more plausible by the day.
The result has been to produce an extraordinary situation where today Scottish
wind‐farms are paid more per unit not to generate electricity than to do so.
‘Constraint’ payments to wind farm operators to switch off have sky‐rocketed in
the UK: from £5.9 million in 2012 to £53 million in 2014. The biggest on‐shore
wind farm in the UK is Whitelee near Glasgow and during 2014 it was paid
more that £20 million to shut off its turbines.
Given the collapse of North Sea oil revenue and the scale of rent‐seeking
income that Scotland is guaranteed in its two way bet either from selling wind
power into the national grid or from obtaining constraint payments for turning
off wind turbines so as not to destabilise the grid, the SNP would have every
incentive to maintain and increase the present arrangements to the fury ofEnglish electors.

8th February 2015
Herefordshire© G.Prins 201468

http://annualreport.tennet.eu/2013/userfiles/pdf/TENNET_Annual_Report_2013.pdf

57
Contact : report@tky.ieej.or.jp